ROAS (return on ad spend)
Return on ad spend, or ROAS, is the revenue generated for every unit of currency spent on advertising. It is calculated by dividing revenue attributed to ads by the amount spent on those ads, and is usually expressed as a ratio such as 4 to 1.
In practice
What it means when you are the one making the decision.
ROAS measures revenue, not profit. A ratio that looks healthy can still lose money once product costs, delivery and discounts are counted, so it should be read next to margins. A business with thin margins needs a higher ROAS to break even than one with large margins.
Attribution affects the number: different tools may credit sales to ads differently. Use one consistent method when comparing campaigns, and treat the figure as a guide for allocating budget, not an absolute truth.
Example
A store spends ₹50,000 on ads and records ₹200,000 in sales from them. The ROAS is 4, or four rupees of revenue per rupee spent.
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