Return on Ad Spend (ROAS) measures how much revenue you earn for every unit of currency spent on advertising — calculated as revenue from ads divided by ad spend.
ROAS = Revenue from ads ÷ Cost of ads
Spend ₹1,00,000 and earn ₹4,00,000 in attributable revenue, and your ROAS is 4× (often written 4:1 or 400%).
It depends on your margins. A business with thin margins needs a much higher ROAS to be profitable than one with high margins. A common rule of thumb is 4× as a starting target, but the honest answer is the ROAS at which you make money after all costs.
ROAS counts only ad spend against revenue. ROI (return on investment) counts all costs — ad spend plus management, tools, time and cost of goods — against profit. ROAS can look healthy while ROI is negative, so use both.
It depends on your profit margins. Low-margin businesses need a higher ROAS to be profitable; a frequent starting target is around 4x, but the real answer is the point at which you profit after every cost.
ROAS compares revenue to ad spend only. ROI compares profit to all costs, including management, tools and cost of goods. ROAS can be positive while ROI is negative.
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