ROAS

What it means

ROAS says how much revenue one euro of advertising returns. It is a quick performance figure, but it says nothing about profit until margin comes out of that revenue.

At a 30 % margin, a ROAS of 3 merely breaks even on the ad spend. At 60 % the same campaign makes money. A target ROAS is therefore a calculation from your own economics, not a universal number.

ROAS puts only the amount paid to the ad platform in the denominator. Agency fees, creative production and your own marketer’s time are not in it; that is how it differs from a campaign’s ROI, which should include every cost. Two channels with the same ROAS can therefore have very different real returns.

How it works in practice

For an e-shop, calculate ROAS after returns, shipping and payment gateway fees. Otherwise a campaign with 40 % returns looks as good as one without.

For services with long decision cycles, pair it with acquisition cost and customer value. The first order may bring almost nothing.

We can keep advertising costs in the books by channel, so the platform’s ROAS can be checked monthly against the actual invoices and the revenue in the ledger. With invoices from foreign platforms we also watch the VAT self-assessment, which is most often overlooked for social media advertising.

What to watch out for

A high ROAS on brand keywords is an illusion: a customer searching your name would have come anyway. Watch incremental effect, not just the number in the ad account.

Every ad platform credits itself with any sale it touched, so revenue summed across platforms usually exceeds the e-shop’s real revenue. A budget split on that inflated ROAS favours the channels best at claiming credit, not best at selling; the check is a comparison with the books and with web analytics.