What is ROAS?

ROAS (Return On Ad Spend) is the ratio between the revenue generated by ads and the cost of those ads. A ROAS of 5 means every euro you spend on advertising brings in 5 euros in revenue. ROAS is the central KPI for e-commerce businesses advertising through SEA and Google Ads.

How do you calculate ROAS?

ROAS = ad revenue / ad spend x 100%. With conversion tracking in Google Ads, transaction values are linked to clicks automatically. Use UTM tags to measure and validate revenue in Google Analytics 4 as well.

Target ROAS as a bidding strategy

Google Ads offers Target ROAS as an automated bidding strategy. You set the ROAS you want and Smart Bidding adjusts the CPC bids automatically in each auction to reach that goal. At least 50 conversions per month is recommended for stable results.

ROAS versus ROI

ROAS measures revenue relative to ad spend. ROI also takes product costs, logistics and other expenses into account. Combine both with CPA for strategic decisions about how to split your budget.

What is a good ROAS?

That depends on your margins. With a gross margin of 40%, your ROAS needs to be at least 2.5x to break even on ad spend.

How do I increase my ROAS?

By advertising better products, optimising your landing page and eliminating irrelevant clicks with negative keywords.

What if my ROAS is too low?

Analyse which campaigns are underperforming and pause loss-making elements. More at developers.google.com/search.