ROAS = Revenue ÷ Ad Spend
But there's more to it than that. This guide covers 3 calculation methods, 3 business models, and platform-specific nuances.
Understanding ROAS Calculation
ROAS (Return on Ad Spend) calculation is fundamental to measuring advertising effectiveness. Before diving into formulas, understand what you're actually measuring.
What ROAS Calculation Measures
ROAS calculation tells you how much revenue you generate for every dollar spent on advertising. A ROAS of 4× means you earn $4 for every $1 spent on ads.
Why Accurate Calculation Matters
Inaccurate ROAS calculations lead to poor budget decisions. Overestimate your ROAS and you might scale unprofitable campaigns. Underestimate it and you might kill campaigns that are actually working.
Basic vs Advanced Methods
Basic ROAS uses a simple revenue-to-spend ratio. Advanced methods factor in profit margins, attribution models, and incremental lift. The right method depends on your goals and data availability.
Want to understand the fundamentals? Read our ROAS Formula guide →
The Basic ROAS Formula
The standard ROAS formula is straightforward: divide your revenue from ads by your ad spend.
ROAS = Revenue from Ads ÷ Ad SpendExample Calculation
$10,000 revenue from $2,500 ad spend
$10,000 ÷ $2,500 = 4.0×
For every $1 spent, you earn $4 in revenue
When to Use Basic ROAS
- • Quick performance snapshots
- • Comparing campaigns with similar margins
- • When you don't have detailed cost data
Limitations
- • Doesn't reflect actual profit
- • Ignores product costs (COGS)
- • Can be misleading for low-margin products
ROAS Calculation Methods Compared
There are three main approaches to ROAS calculation, each suited for different purposes.
| Method | Formula | Best For | Pros | Cons |
|---|---|---|---|---|
| Basic ROAS | Revenue ÷ Ad Spend | Quick performance checks | Simple, easy to calculate, universally understood | Doesn't reflect true profitability |
| True ROAS (Profit-Based) | (Revenue - COGS) ÷ Ad Spend | Profitability analysis | More accurate for business decisions | Requires cost of goods data |
| Incremental ROAS (iROAS) | Incremental Revenue ÷ Ad Spend | Measuring true ad impact | Most accurate, isolates ad effect | Requires control experiments |
Most businesses should track at least basic and true ROAS. Incremental ROAS is valuable for mature advertising operations with testing capabilities.
ROAS Calculation by Business Model
Different business models require different calculation considerations. Here's how to approach ROAS for your specific situation.
Platform-Specific ROAS Calculation
Each advertising platform calculates ROAS differently. Understanding these nuances prevents comparing apples to oranges.
| Platform | Default Model | Window | Key Metric |
|---|---|---|---|
| Google Ads | Data-driven | 30 days | Conv. Value / Cost |
| Meta Ads | 7d click / 1d view | 7 days | Purchase ROAS |
| Amazon Ads | Last-click | 14 days | 1 / ACOS |
Advanced ROAS Calculation Concepts
For mature advertising operations, these advanced concepts provide deeper insights into your true advertising effectiveness.
Common ROAS Calculation Mistakes
Avoid these frequent errors that lead to inaccurate ROAS calculations and poor decisions.
Ignoring Attribution Windows
Using different attribution windows makes comparison impossible. A 1-day window vs 28-day window will show vastly different ROAS.
Standardize on one window (7-day click is common) for internal comparisons.
Mixing Revenue Metrics
Comparing gross revenue ROAS with net revenue ROAS, or mixing currency values.
Always specify which revenue metric you're using and keep it consistent.
Not Accounting for Returns
Counting revenue from orders that were later refunded inflates your ROAS.
Use net revenue after returns, or apply a historical return rate adjustment.
Platform Discrepancies
Expecting platform-reported ROAS to match your backend analytics exactly.
Use your own tracking as source of truth, understand platform biases.
Need a step-by-step guide? Read our How to Calculate ROAS tutorial →
Try the Free ROAS Calculator
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Your ROAS
For every $1 spent, you earn 4 in revenue.