ROAS (Return on Ad Spend)
ROAS is the revenue generated for every dollar of ad spend. A 4× ROAS means $4 of revenue for every $1 spent. It's the standard efficiency metric for paid media.
What it is
Return on Ad Spend is a simple ratio: revenue attributed to ads divided by ad spend. It's reported as a multiple (4×) or a percentage (400%). ROAS is gross — it doesn't account for margin or operating costs. For that, use POAS (profit on ad spend) or net contribution-margin ROAS.
How to calculate
ROAS = Revenue from ads / Ad spend.
Example: $100,000 of attributed admit revenue / $25,000 ad spend = 4× ROAS.
Profit-aware version: POAS = (Revenue × Margin %) / Ad spend. For a service with 30% contribution margin: $100,000 × 0.30 / $25,000 = 1.2× POAS.
Why it matters
ROAS is the metric most ad platforms optimize toward. But it's deceptive in isolation: a 10× ROAS on $5K/mo can be worse than a 3× ROAS on $50K/mo for total profit. Pair ROAS with absolute revenue or margin, not in isolation.
Frequently asked questions
What's a 'good' ROAS?
Depends on margin and lifetime value. For ecom: 2–3× is often profitable, 4–6× is great. For high-margin services like behavioral health admissions, 4× is often the floor of acceptable.
Should I target ROAS in Smart Bidding?
Use Target ROAS when you have conversion values attached and at least 30 conversions / 30 days. Otherwise start with Maximize Conversions, then graduate.
Is ROAS the same as ROI?
No. ROI = (Revenue − Cost) / Cost. ROAS = Revenue / Cost. ROI nets the spend; ROAS is gross.
