ROAS Calculator

What is ROAS (Return on Ad Spend)?

ROAS stands for Return on Ad Spend. It is one of the most important metrics in digital advertising because it tells you exactly how much revenue you generate for every dollar spent on ads. If your ROAS is 5:1, you earn $5 for every $1 invested in advertising.

Marketers use ROAS to evaluate the effectiveness of individual campaigns, ad groups, or entire channels. Unlike broader metrics such as ROI, ROAS focuses specifically on ad spend, making it the go-to metric for paid media performance. A higher ROAS means your advertising dollars are working harder for you.

How ROAS is Calculated

The ROAS formula is straightforward. You only need two numbers: the revenue generated from your ads and the total amount spent on those ads.

Related formulas this calculator also computes:

• ROAS % = (Revenue / Ad Spend) x 100
• ROI % = ((Revenue - Ad Spend) / Ad Spend) x 100
• Profit = Revenue - Ad Spend

Example: $5,000 revenue from $1,000 in ads

1. ROAS = $5,000 / $1,000 = 5:1
2. ROAS % = 5 x 100 = 500%
3. ROI = ($5,000 - $1,000) / $1,000 x 100 = 400%
4. Profit = $5,000 - $1,000 = $4,000

What is a Good ROAS?

A "good" ROAS varies by industry, channel, and profit margins. A business with 80% margins can afford a lower ROAS than one with 20% margins (use our markup calculator to understand your margins). That said, here are common benchmarks by advertising channel:

Keep in mind that these are general benchmarks. Your target ROAS should be based on your own profit margins, customer lifetime value, and business goals. A 2:1 ROAS might be excellent for a SaaS company with high LTV. Use our growth rate calculator to track revenue growth alongside ROAS, while an e-commerce brand selling low-margin products may need 5:1 or higher to stay profitable.

ROAS vs ROI

ROAS and ROI are related but measure different things. ROAS only considers ad spend as the cost. ROI accounts for all costs associated with generating that revenue, including product costs, shipping, overhead, and team salaries.

• ROAS = Revenue / Ad Spend (measures ad efficiency)
• ROI = (Revenue - Total Costs) / Total Costs x 100 (measures overall profitability)

For example, if you spend $1,000 on ads and earn $5,000 in revenue, your ROAS is 5:1. But if your product costs, shipping, and other expenses total $3,000, your actual ROI is ($5,000 - $4,000) / $4,000 = 25%. Both metrics are valuable. Use ROAS to optimize campaigns and ROI to understand true business profitability.

Target ROAS Bidding

Google Ads offers a Google Ads Target ROAS bidding strategy that automatically adjusts your bids to achieve a specific return on ad spend. You set your desired ROAS (for example, 400% means you want $4 back for every $1 spent), and Google's algorithm optimizes bids in real time to hit that target.

To use Target ROAS bidding effectively, you need at least 15 conversions in the past 30 days so the algorithm has enough data. Start with a target that matches your current ROAS, then gradually increase it. Setting the target too high too fast can restrict your ad delivery and reduce total conversions.

How to Improve Your ROAS

If your ROAS is below your target, there are two levers: increase revenue from ads or decrease ad spend while maintaining revenue. Here are practical ways to do both:

• Refine your audience targeting. Narrow down to high-intent segments that are more likely to convert. Use lookalike audiences based on your best customers.
• Improve your ad creatives. Test different headlines, images, and calls to action. Better creatives increase click-through rates and lower your cost per acquisition.
• Optimize your landing pages. A faster, clearer landing page converts more visitors. Even small improvements in conversion rate significantly boost ROAS.
• Cut underperforming campaigns. Review your campaigns weekly. Pause ads with high spend and low returns, then reallocate that budget to top performers.
• Use retargeting. Retargeting ads typically have 2-3x higher ROAS than prospecting campaigns because they reach people already familiar with your brand.
• Increase average order value. Upsells, bundles, and free shipping thresholds increase revenue per conversion without increasing ad spend.

How to Calculate ROAS in Excel

For tracking ROAS across multiple campaigns in a spreadsheet, use this simple formula:

Where A1 is the revenue from ads and B1 is the ad spend. To display it as a ratio, use: =TEXT(A1/B1,"0.00")&":1". For ROI percentage, use: =((A1-B1)/B1)*100. These formulas work in Google Sheets, Excel, and LibreOffice Calc.

Frequently Asked Questions