ROAS
Return on Ad SpendROAS measures the revenue generated for every unit of currency spent on advertising.
ROAS looks impressive until you realise you spent ₹10 lakh to make ₹11 lakh in revenue on a product with 20% margins — a loss of roughly ₹7.8 lakh once cost of goods is subtracted, dressed up as a "1.1x ROAS." The number is directionally positive and economically terrible. This is the single most common way performance dashboards mislead the people reading them: they report revenue efficiency, not profit.
A campaign at 5x ROAS isn't automatically better than one at 3x. The 5x campaign might be selling a low-margin commodity product; the 3x campaign might be selling something with fat margins. Always check ROAS against break-even ROAS (1 ÷ gross margin) before deciding whether a number is good.
The other trap: what most platforms report as "ROAS" is attributed revenue, not incremental revenue. A branded-search or retargeting campaign can show an enormous ROAS by taking credit for purchases that would have happened anyway. See incrementality and incremental ROAS for the more honest version of this number.
ROAS
ROAS = Attributed Revenue ÷ Advertising SpendExample
A fashion D2C brand spends ₹2,00,000 on Meta Ads in a month and the platform attributes ₹8,00,000 in revenue to those ads.
ROAS = ₹8,00,000 ÷ ₹2,00,000 = 4x.
At a 35% gross margin, break-even ROAS is 1 ÷ 0.35 ≈ 2.86x — so 4x is genuinely profitable, not just revenue-positive. At a 15% margin, break-even ROAS would be 6.7x, meaning the same 4x result would be a loss.
No single standard definition
"ROAS" almost always means attributed ROAS unless a team explicitly says "incremental ROAS" or "iROAS." The two can differ by a large margin, especially for brand and retargeting campaigns.
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