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Revenue per euro, not profit per euro
ROAS, return on ad spend, is the first number you see in any ad account. Spend 1,000 euros on Google Ads, sell 4,000 euros through those clicks, and your ROAS is 4. Google often writes the same thing as a percentage: a ROAS of 4 is 400 percent.
The number belongs to advertising you pay per click or per impression: search ads, Shopping, and ads on Facebook and Instagram. Organic SEO has no cost per click, so it has no ROAS; there you judge the return on the work, the ROI.
A number from online retail
ROAS comes from direct marketing, where companies worked out long before the internet how much a mailing or a catalogue sold per unit of currency spent. Online advertising made it measurable per campaign, per ad and per keyword, because every click and every sale can be tracked. Google turned it into a control: with the target ROAS bid strategy you state how much conversion value you want per euro, and Google sets your bids to match. Meta shows its own purchase ROAS column in Ads Manager.
A bike shop with 800 euros of Google Shopping
Take a bike shop in Utrecht with an online store. In October it spends 800 euros on Google Shopping, and conversion tracking records 5,200 euros of sales from those clicks, excluding VAT. Its ROAS is 5,200 divided by 800: 6.5.
The shop keeps a 30 percent margin after purchasing. The line between profit and loss, the break-even ROAS, is 1 divided by that margin: 1 divided by 0.30 is 3.33. At 6.5 the campaign sits well above it: every 6.50 euros of sales leaves 1.95 euros of margin, for 1 euro of advertising. Drop under 3.33 and each sale through those ads costs money. Run your own numbers in our ROAS calculator.
Above or below the break-even of your margin
Revenue from adsAd spend
- Campaign A, non-brand search2.5 euro per 1 euroloss
- Campaign B, retargeting4 euro per 1 eurobreak-even
- Campaign C, own brand name6.5 euro per 1 europrofit
Same store, same margin: only the campaign above the line pays for itself.
Five numbers in your ad account
ROAS is one of five numbers you will find in any ad account. Each measures something else, and only together do they tell you whether a campaign works.
| Number | What it measures | Formula | Example |
|---|---|---|---|
| ROAS | Revenue per euro of ads | revenue divided by ad spend | 4,000 / 1,000 = 4 |
| ROI | Profit per euro invested in total | (return minus cost) divided by cost | (1,200 minus 1,000) / 1,000 = 20 percent |
| CPC | What a click costs | ad spend divided by clicks | 1,000 / 800 clicks = 1.25 euros |
| CPA | What a customer or lead costs | ad spend divided by conversions | 1,000 / 40 = 25 euros |
| CTR | How many people click what they see | clicks divided by impressions | 800 / 20,000 = 4 percent |
If you sell services rather than products, you get leads, not revenue per click. Give each lead a value: your average order times the share of leads that become customers. A contractor with jobs of 1,500 euros on average who wins one in five leads works with 300 euros per lead. A sales funnel shows where those leads drop out.
Measuring is free, measuring wrong is not
The number itself is free: Google Ads and Meta show it as soon as you track conversions with a value. The tracking is the work. You need a tag or pixel on your site that reports a sale or a lead, and in Europe a consent banner before it fires. To let Google bid on target ROAS, Search and Shopping campaigns need at least 15 conversions in the past 30 days; a small campaign will not reach that and is better steered on clicks or conversions.
What it returns: you see which campaign deserves your budget. A campaign at ROAS 2 next to one at ROAS 7 in the same account almost always means money should move from the first to the second. The marketing budget calculator works out how much you need in total, and the guide to Google Ads cost shows what a click costs in your field.
Where the number flatters you
VAT in the revenue. In the EU, Google and Meta invoice a VAT-registered business without VAT, under the reverse charge. If your store reports revenue including 21 percent VAT, as in the Netherlands and Belgium, your ROAS is 21 percent too high. Track revenue excluding VAT, in every country you sell in.
Two platforms, one sale. When someone clicks your Instagram ad and buys a week later through Google, both platforms may count that sale. Add up the ROAS of Google and Meta and the whole looks better than it is. Hold the sum against the revenue in your books.
Customers you already had. A campaign on your own company name often shows a ROAS of 10 or more, because those people were searching for you anyway. Retargeting, ads to people who already visited your site, works the same way. High ROAS, few new customers: watch your non-brand campaigns, they make the real growth.
What stores and advertisers ask
What is a good ROAS?
A ROAS above your own break-even, which is 1 divided by your gross margin. At a 25 percent margin you need more than 4, at 50 percent more than 2. There is no number that is good for every business: a store with thin margins needs a far higher ROAS than a service company.
What is the difference between ROAS and ROI?
ROAS looks at revenue, ROI at profit. ROAS divides revenue by ad spend; ROI first subtracts every cost, including purchasing, shipping and campaign management. A campaign can show a fine ROAS and still lose money when the margin is too small.
What is target ROAS in Google Ads?
A bid strategy: you state how much conversion value you want per euro of ads, for instance 500 percent, and Google sets your bids to match. It needs data first: for Search and Shopping at least 15 conversions in the past 30 days, each with a value.
Should I calculate ROAS with or without VAT?
Without. Ad platforms invoice EU businesses without VAT, so revenue should exclude it too. Calculate with revenue including 21 percent VAT and your ROAS comes out 21 percent too high.