ROAS (Return on Ad Spend)
ROAS (return on ad spend) is a performance marketing metric that sets the revenue generated by advertising against the advertising spend used to achieve it. A ROAS of 5 means every euro of ad budget generated five euros in revenue – profit and contribution margin are not accounted for.
In practice
In practice, ROAS is calculated in Google Ads and GA4 from the conversion values you pass in, and it often serves as the target for automated bidding strategies such as target ROAS, which Google Ads states as a percentage: a ROAS of 5 corresponds to a target ROAS of 500 per cent there. It is important not to confuse ROAS with profitability: a high ROAS on a thin margin can still be uneconomical, while a lower ROAS on a healthy margin remains profitable. ROAS should therefore always be read alongside contribution margin and customer lifetime value rather than in isolation as the single measure of success.