What is ROAS and Why It Matters for Your Business

ROAS (Return on Ad Spend) is one of the most important metrics for any advertising campaign. But what does it actually mean and how should you interpret it?

What Does ROAS Mean?

ROAS represents the ratio between the revenue generated by your advertising campaigns and the cost of those campaigns. The formula is simple:

For example, if you spent €1,000 on ads and generated €3,500 in sales, your ROAS is 3.5x (or 350%).

What is Considered a Good ROAS?

It depends on your industry and profit margins. As a general rule:

• E-commerce: 3x - 4x is considered good
• SaaS: 2x - 3x (due to high LTV)
• Local Business: 4x - 6x
• Fashion/Beauty: 3x - 5x

ROAS vs ROI

ROAS only measures the efficiency of your advertising spend. ROI (Return on Investment) takes into account all costs - including product costs, salaries, and overhead.

You can have a 3x ROAS and still lose money if your margins are thin. That's why it's important to know your break-even ROAS.

How to Improve Your ROAS

1. Optimize targeting - more relevant audiences mean cheaper conversions
2. Test creatives - change images, copy, and CTAs
3. Improve landing pages - better conversions reduce cost per acquisition
4. Use retargeting - warm audiences convert better
5. Optimize for value - not just for conversions