A ROAS calculation divides the revenue attributed to your ads by their cost, so $5,000 of attributed revenue on $1,000 of spend gives a ROAS of 5 (also written 5:1, 5x or 500%). The result depends on which revenue and which costs you include, so divide only over the same period, count agency fees and commissions in the cost, and compare the result with a break-even ROAS. This guide derives break-even ROAS as 1 divided by gross margin, which is the author's own arithmetic and not a figure from a source.
This guide covers the formula for return on ad spend in digital advertising, the difference between ratio and percentage notation, what belongs in the inputs, and how to turn the result into a profit check on your advertising efforts with a break-even point. ROAS measures revenue against cost, so it is not a return on investment (ROI) figure. The facts come from published explainers by software vendors and publishers, so none of them is an independent test. Worked examples marked as hypothetical are arithmetic only, not data from a source.
ROAS calculation formula
The formula divides the revenue generated by your ads by their cost, so it summarises ad performance as the number of dollars that came back for every dollar of cost:
ROAS = revenue attributed to ads ÷ ad cost
Sources write it two ways.
- Ratio form. Improvado gives the example of $100 of ad spend producing $500 of revenue, which is a ROAS of 5.
- Percentage form. Shopify, the e-commerce platform, multiplies by 100, so $2,000 of revenue on $1,000 of advertising spend is 200%, or 2:1. Omni Calculator does the same: $3,000 on $1,000 of Facebook ad spend is 300%, and $900 on the same spend is 90%.
Read the 90% case as a low ROAS and a loss before any other cost. For every $1 spent on advertising, the ads brought back 90 cents.
The formula can also be read in reverse, which is one way ROAS helps show the cost per dollar of sales. A ROAS of 5 means a cost per dollar of sales of 20 cents (1 ÷ 5, a simple inversion rather than a figure from a source). A high ROAS means a lower cost per dollar of sales.
How to calculate ROAS step by step
To calculate ROAS, divide the revenue attributed to one ad campaign by its advertising cost over the same time period, using the steps below.
- Pick one ad campaign or channel and one time period. Sales and cost must cover the same window.
- Add up the total ad revenue attributed to those ads, and see the next two sections for what to count.
- Add up the advertising cost for the same campaign and window.
- Divide the first figure by the second.
- Choose a notation (5, 5x or 500%) and use it everywhere you report the metric, so that anyone tracking ROAS or trying to optimize a campaign works from the same figure.
Worked example with hypothetical numbers: a campaign spends $4,000 in a month and the platform attributes $14,000 to it. The result is 14,000 ÷ 4,000 = 3.5, or 350%. Whether that is a good ROAS depends on your margins. Using the author's own arithmetic, not a figure from a source, break-even ROAS is 1 divided by gross margin: each $1 of revenue leaves only the margin share to cover ad cost, so the ads must bring back 1 ÷ margin dollars for every dollar spent. With a hypothetical 40% profit margin before ad costs, break-even is 1 ÷ 0.4 = 2.5, so 3.5 clears it as a profitability check.
Ratio or percentage
Platforms and publishers do not agree on notation. Shopify, Omni Calculator and Growthloop multiply by 100 and report a percentage. Improvado and Rule1 report a multiplier such as 5 or 4x.
Google Ads mixes the two. According to Search Engine Land, the "Conv. value / cost" column shows a decimal such as 3.0, while the target ROAS field takes a percentage such as 300%. Entering 3 where 300% is meant sets a ROAS target of 3%, which Search Engine Land describes as an error. Google's own example for the field is $5 in sales ÷ $1 in ad spend × 100% = a 500% target.
When you compare a ROAS target with reported results, convert both to the same notation first.
What counts as revenue
The numerator is attributed revenue, and each platform defines it differently.
- Google calculates ROAS as conversion value divided by cost, and its reports show this in the "Conv. value / cost" column, according to Search Engine Land and a Productmetrics glossary entry. Conversion value typically means revenue, but it can instead reflect what a conversion is worth to the business.
- Third-party explainers describe Meta's version as attributed purchase value divided by ad spend.
Because the definitions differ, a ROAS figure from one platform is not directly comparable with a figure from another. Compare like with like, and check which conversion actions feed the revenue number before you act on it. Attribution software exists to reconcile these views, and the AI analytics and attribution tools hub lists the ones reviewed on this site.
What counts as cost
The denominator is easy to understate. Explainers from CDP, Rule1 and CFI point to costs beyond the media bill, such as agency fees, commissions and creative production. A ROAS that divides only by platform spend looks higher than one that divides by the full cost of running the campaign.
Pick one definition of cost and keep it. If you report ROAS on media spend alone, say so wherever the number appears. If you include fees, commissions and creative production, apply the same rule to every campaign you compare. Hypothetical example: $14,000 of attributed revenue on $4,000 of media spend is 3.5, but if agency fees and creative production add $1,000, the same revenue on $5,000 of total cost is 2.8.
Common mistakes
- Mismatched periods. Revenue from one window divided by cost from another gives a number that means nothing.
- Mixed notation. A target of 3 entered where 300% is meant is the Google Ads error described above.
- Partial costs. Leaving out agency fees, commissions or creative production inflates the ratio.
- Treating ROAS as profit. It compares revenue with ad cost, not with margin or other business costs, so a ROAS above 1 can still lose money. The break-even check above is the simplest correction.
- Comparing platform figures directly. Each platform attributes revenue its own way.
Next step
Work out your gross margin, use it to find your break-even ROAS with the arithmetic above, and compare each campaign's ROAS with that figure using the same revenue and cost definitions every time. To see which tools help with attributing revenue and managing campaigns, browse the AI ad platforms and PPC tools hub. If you want an outside team to run the campaigns, the AI PPC agencies hub covers the agencies reviewed on this site.