ROAS (return on ad spend) – formula, worked example and break-even ROAS

Definition

ROAS (return on ad spend) measures how much revenue an advertising campaign generates for every unit of currency spent on it. It is calculated as ad revenue divided by ad cost – a ROAS of 4 means every SEK 1 of ad budget returned SEK 4 in revenue.

What is ROAS?

ROAS stands for return on ad spend and measures how much revenue an advertising campaign returns for every unit of currency spent on it. It is one of the most common metrics in paid advertising – in Google Ads, Meta and other channels – because it quickly shows how efficiently the ad budget is turned into revenue. ROAS is written either as a number (4) or as a percentage (400%); both mean the same thing.

How do you calculate ROAS?

The formula is simple:

ROAS = ad revenue / ad cost

Example: you spend SEK 20,000 on a Google Ads campaign that generates SEK 70,000 in revenue. The ROAS is 70,000 / 20,000 = 3.5. Every SEK 1 of ad spend returned SEK 3.50.

Break-even ROAS – why your margin decides everything

This is where many people go wrong, assuming that a ROAS above 1 means a profit. It does not – ROAS is calculated on revenue, not profit. To know where you break even, you have to factor in your gross margin:

Break-even ROAS = 1 / gross margin

• With a 35% margin: 1 / 0.35 = 2.86. You need a ROAS of at least 2.86 for the campaign to pay for itself.
• With a 60% margin: 1 / 0.60 = 1.67. A much lower ROAS is enough here.

In other words, a ROAS of 3 can be excellent for one company and loss-making for another – it all depends on the margin. ROAS says nothing about profitability until you compare it with your break-even point.

ROAS vs ROI – what is the difference?

ROAS and ROI are often confused. ROAS is revenue divided by ad cost and ignores both margin and all other costs. ROI measures actual net profit relative to the total investment and shows real profitability. Use ROAS to steer individual campaigns and ROI to judge the overall picture. Read more in our guide What is ROI?.

Below you will also find our calculator, where you can work out both ROI and ROAS.

Work out your ROI

Work out what an investment returns. The version in the SEO articles also shows the payback period.

Choose modeROIROAS

Amount invested (SEK)Revenue / return (SEK)

Ad spend (SEK)Ad revenue (SEK)Gross margin (%), optional, for break-even

• ROI60.00%
• Net profitSEK 30,000

The investment returned more than it cost.

The model assumes traffic builds up linearly until full effect and holds steady after that. SEO ROI is an estimate: the actual return depends on competition and starting point.

More free tools

What is a good ROAS?

There is no universal figure. A good ROAS is one that sits comfortably above your break-even ROAS, with room for other costs such as shipping, returns and platform fees. Two companies with the same ROAS can have completely different profitability depending on their margins. So always start by calculating your break-even – then you know what you are actually aiming for.