What is ROAS?
Return on ad spend (ROAS) is revenue from ads divided by the cost of those ads. $40,000 of revenue from $10,000 of spend is a 4x ROAS (also written 400% or 4:1). It is the fastest way to compare campaigns, but on its own it says nothing about profit.
Break-even ROAS depends on your margin
A 4x ROAS is excellent at a 60% margin and a loss at a 20% margin. Break-even ROAS is 1 divided by gross margin: the point where ad revenue's margin exactly covers the ad cost.
| Gross margin |
Break-even ROAS |
4x ROAS is |
| 20% |
5.0x |
a loss |
| 30% |
3.3x |
thin profit |
| 40% |
2.5x |
profitable |
| 50% |
2.0x |
good |
| 60% |
1.7x |
strong |
| 80% |
1.25x |
very strong |
Enter your margin in the calculator and it flags whether the campaign clears break-even after disputes.
Gross margin or contribution margin?
Gross margin ignores the costs that scale with every paid order: payment fees, shipping you do not recover, and pick and pack. Use contribution margin for the break-even line and the floor moves up.
$37.50
gross margin on a $75 order
50%
−$2.48
card processing
2.9% + $0.30 (Stripe standard rate)
−$7.00
unrecovered shipping and pick and pack
$5 + $2
$28.02
contribution margin
37.4%, break-even ROAS 2.68x
The same campaign needs 2.68x, not 2.0x, before it earns anything. A chargeback adds a $15 dispute fee on top of the lost order, so at a 2% dispute rate that is another 30 cents per paid order. Enter contribution margin in the calculator when you know it.
Target ROAS: break-even is a floor
Break-even ROAS leaves zero profit. Set the target by how much of revenue you want to keep: target ROAS = 1 ÷ (margin − profit share of revenue).
| Gross margin |
Break-even |
Keep 10% of revenue |
Keep 20% of revenue |
| 30% |
3.3x |
5.0x |
10x |
| 40% |
2.5x |
3.3x |
5.0x |
| 50% |
2.0x |
2.5x |
3.3x |
| 60% |
1.7x |
2.0x |
2.5x |
Google Ads bidding expresses the same number as a percentage: a store that wants $5 of sales per $1 of spend sets a target ROAS of 500%. Set the bidding target above the contribution break-even, not the gross one.
ROAS and ACoS are the same number upside down
Amazon reports advertising cost of sales (ACoS), which is ad spend divided by ad revenue. ACoS = 1 ÷ ROAS. A 25% ACoS is a 4x ROAS. Break-even ACoS equals your margin, so a 40% margin breaks even at 40% ACoS (2.5x ROAS).
| ACoS |
ROAS |
Profitable at 40% margin? |
| 20% |
5.0x |
yes |
| 25% |
4.0x |
yes |
| 33% |
3.0x |
yes, thin |
| 40% |
2.5x |
break-even |
| 50% |
2.0x |
loss |
Net ROAS: counting only the orders that stayed
Ad platforms report ROAS on orders placed. Refunded and charged-back orders still cost the click. The calculator removes them at the rates you set.
Reported ROAS
4.0x
$40,000 on $10,000
Lost to refunds
−$1,200
3% of revenue
Lost to chargebacks
−$200
0.5% of revenue
Net ROAS
3.86x
revenue that stayed
In categories with 20% return rates (apparel) or high dispute rates (digital goods, trials), net ROAS can sit 20% to 30% below the platform number, which turns a "profitable" campaign into a loss.
What is a good ROAS?
Google Search, branded8x to 15x Google Search, non-brand3x to 6x Meta (Facebook, Instagram)2x to 4x Display and retargeting4x to 10x Ranges are broad averages for US ecommerce; attribution windows and models change them a lot. Judge every channel against your own break-even ROAS, not the industry median.
ROAS vs ROI
ROAS is revenue over spend and ignores margin and other costs. ROI is profit over spend. A 4x ROAS at 50% margin is a 100% ROI: $40,000 revenue × 50% = $20,000 margin, minus $10,000 spend, divided by $10,000. The calculator's "marketing efficiency" line is profit per $1 spent, which is ROI expressed per dollar.
How to improve ROAS
Raise conversion rate on landing pagesSame clicks, more orders. A 20% conversion lift is a 20% ROAS lift.
Cut wasted spendNegative keywords, excluded placements and frequency caps remove the clicks that never convert.
Raise AOV on paid trafficBundles and thresholds lift revenue per click without new spend.
Segment by product marginPush spend toward high-margin SKUs where break-even ROAS is lowest.
Reduce refunds and disputes on paid ordersClear product pages and delivery estimates cut returns; fast support cuts chargebacks. Both raise net ROAS directly.
Use longer attribution for considered purchasesA 7-day window undercounts furniture and electronics; a 1-day window overcounts impulse categories.
Frequently asked questions
How do you calculate ROAS?
Divide revenue from ads by ad spend. $40,000 ÷ $10,000 = 4x, also written 400%.
What is a good ROAS?
Above your break-even ROAS, which is 1 divided by gross margin. Most ecommerce brands target 3x to 4x overall; branded search runs much higher and paid social lower.
What is break-even ROAS?
The ROAS at which the margin on ad revenue equals the ad cost: 1 ÷ gross margin. At 40% margin it is 2.5x.
What is the difference between ROAS and ROI?
ROAS is revenue ÷ spend. ROI is (profit − spend) ÷ spend. ROAS ignores margin; ROI does not. A 4x ROAS at 50% margin is a 100% ROI.
How do refunds and chargebacks affect ROAS?
They remove revenue after the ad platform has counted it. Net ROAS = revenue × (1 − refund rate − dispute rate) ÷ spend. At 3% refunds and 0.5% disputes, a 4x ROAS is really 3.86x.
Is a 2x ROAS profitable?
Only if gross margin is above 50%. At 50% margin, 2x is exactly break-even before any other costs.
Is a 2.2x or a 3.8x ROAS good?
Divide 1 by your margin and compare. At a 40% margin, break-even is 2.5x, so 2.2x loses money and 3.8x keeps about 14% of revenue after ads. At a 60% margin, 2.2x already clears break-even (1.7x). Neither number is good or bad on its own.
What ROAS is a 25% ACoS?
4x. ACoS is 1 ÷ ROAS, so 25% ACoS means $4 of sales per $1 of ads. Break-even ACoS equals your margin: a seller with a 30% margin breaks even at 30% ACoS, which is 3.3x ROAS.
What is MER and how is it different from ROAS?
Marketing efficiency ratio (MER) is total revenue divided by total marketing spend for the period, with no attribution. ROAS is per campaign and depends on the platform's attribution window. MER catches double-counting when several platforms claim the same order.
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