ROAS (Return on Ad Spend)
In one sentence
Sales generated by advertising divided by advertising spend, used to measure campaign effectiveness.
ROAS only factors in ad spend and attributed sales—excluding product costs and other expenses—so a ROAS above 1 does not necessarily mean you are profitable.
To determine whether ad spend is profitable, calculate it alongside your gross margin.
Example
Spending 10,000 RMB on ads to generate 40,000 RMB in sales yields a ROAS of 4.
Related terms
- Return on Investment (ROI)
- The ratio of gain generated by an investment relative to its cost, used to evaluate whether an investment is worthwhile.
- Customer Acquisition Cost (CAC)
- The average cost to acquire a new customer, calculated by dividing total sales and marketing spend over a given period by the number of new customers acquired.
- Conversion Rate
- The percentage of total users who complete a target action, such as the proportion of visitors who leave contact details or inquiries that close into deals.
