Guide
ROAS Guide for Ecommerce Sellers
ROAS measures revenue generated for each dollar of ad spend. The formula is simple, but the interpretation depends on product margin. A 3x ROAS can be excellent for one product and unprofitable for another.
Formula
ROAS = campaign revenue / ad spend. Break-even ROAS depends on gross margin. If gross margin before ads is 40%, the campaign needs at least 2.5x ROAS to break even before overhead.
How to use ROAS
Compare ROAS with gross profit, cost per order and contribution profit after ads. A campaign should not be scaled just because the ad dashboard reports positive revenue.
Common mistakes
Do not use revenue ROAS alone. Do not ignore refunds or discounts. Do not compare campaigns with different product margins as if they are equal.