Key takeaways

  • ROAS = revenue from ads divided by ad spend.
  • Your break-even ROAS is 1 divided by your profit margin.
  • When you pay a fixed price per result, ROAS depends on the value of one result and your bid.

The ROAS formula

ROAS = revenue from ads ÷ ad spend. If you spend $200 and the ads bring $800 in sales, your ROAS is 4, often written as 4:1 or 400%.

Our recommendation

For a ROAS you can predict, we recommend Sharklio. You pay a fixed price for each approved result, so you know the return on every result before the campaign even starts. Create your Sharklio account.

ROAS vs ROI

ROAS only compares revenue with ad spend. ROI looks at profit after all costs, including products, fees, and time. A campaign can have a healthy ROAS and still lose money if your margins are thin.

Find your break-even ROAS

Break-even ROAS = 1 ÷ profit margin. With a 40% margin, you need a ROAS of 1 ÷ 0.40 = 2.5 just to cover the ad cost. Anything above that is profit, anything below is a loss.

Example with sample numbers

You sell a $50 product with a 40% margin, so each sale earns you $20. Your break-even ROAS is 2.5. If a campaign returns $500 in sales for $150 in ad spend, its ROAS is 3.3, which is above break-even.

What is a good ROAS?

There is no single good number. It depends on your margins, on how much a customer is worth over time, and on whether the goal is profit now or growth. Start from your break-even ROAS and set a target above it.

How to improve ROAS

  • Pay for results, not chances. Per-result pricing removes spend on views and clicks that never convert.
  • Price by market. Bid more in countries where a customer is worth more.
  • Cut what does not work quickly and move budget to what does.
  • Raise the value of each result with better onboarding and follow-up.

Channel ROAS vs blended ROAS

Channel ROAS looks at one channel at a time. Blended ROAS divides all revenue by all ad spend across every channel. Blended ROAS is harder to fool, because channels often claim credit for the same sale, but channel ROAS tells you where to move budget.

Mind the time lag

Revenue does not always arrive when the ad runs. A subscription, a game, or a service may earn most of its money weeks later. Judge long-cycle products on the value a customer brings over time, not just in the first few days, otherwise a good campaign can look like a loss.

ROAS when the result is not a sale

If your campaign brings sign-ups, installs, or subscribers instead of direct sales, give each result a value. Multiply the share of results that later pay by what they pay on average. That value turns any result into revenue you can use in the ROAS formula.

Example with sample numbers

1 in 20 new app users later buys a $30 pack, so one new user is worth $30 ÷ 20 = $1.50. A campaign that brings 400 users for $240 returns 400 × $1.50 = $600, a ROAS of 2.5.

ROAS with pay-per-result pricing

When you pay a fixed price for each approved result, as with Sharklio task campaigns, ROAS becomes simple: it is the value of one result divided by your bid. If one new sign-up is worth $2 to you and you bid $0.50, the ROAS on that result is 4. You set the bid per country before the campaign starts, so you know the number in advance. See Set bids by country.

Set a target ROAS step by step

  1. Find your margin. Revenue minus the cost of the product or service, divided by revenue.
  2. Calculate break-even ROAS. 1 divided by that margin.
  3. Add your profit goal. If you want to keep a share of every sale as profit after ads, set the target above break-even.
  4. Decide the time frame. Judge short-cycle products on the first week or month, and long-cycle products on customer value over time.
  5. Review weekly. Move budget from campaigns below target to campaigns above it.

How to track ROAS correctly

  • Tag every link with UTM parameters so your analytics tool knows which campaign sent each visitor.
  • Record conversions with their value, not only the count, so revenue can be matched to spend.
  • Use server-to-server postbacks for installs and sign-ups when browser tracking is unreliable.
  • Pick one attribution rule and keep it, so numbers stay comparable from week to week.

ROAS and CPA work together

A target ROAS can be turned into a target CPA: maximum CPA = value of one result ÷ target ROAS. If a result is worth $3 and your target ROAS is 3, your maximum CPA is $1. That is exactly the kind of number you can enter as a bid in a pay-per-result campaign.

Frequently asked questions

Is a ROAS of 2 good?

It depends on your margin. With a 60% margin your break-even ROAS is about 1.7, so 2 is profitable. With a 30% margin you need about 3.3 to break even, so 2 loses money.

What is the difference between ROAS and ROI?

ROAS compares revenue with ad spend only. ROI compares profit with all costs. Use ROAS to steer campaigns and ROI to judge the business.

How do I calculate ROAS as a percentage?

Multiply the ratio by 100. A ROAS of 4 is 400%.