Return on Ad Spend (ROAS)
Return on ad spend is the gross revenue earned for every unit of currency spent on advertising, calculated as revenue attributed to ads divided by ad spend, so a ROAS of 4 means 4 in revenue for every 1 spent.
ROAS measures revenue, not profit. A ROAS of 4 sounds healthy until you subtract cost of goods, shipping, and fees: if your gross margin is 30 percent, a 4x ROAS roughly breaks even before you have paid for anything else. This is why there is no universal good ROAS. A high-margin product can thrive at 2x, while a low-margin one may need 6x or more just to stay above water. The right target is set by your margin, not by a benchmark someone quotes online.
Stores use ROAS to decide where ad budget goes: which campaigns, audiences, and creatives earn their keep, and which to cut. It is fast to read and easy to compare across channels, which is exactly why it gets over-trusted.
The blind spots are worth stating plainly. ROAS depends entirely on attribution, so platform-reported figures often claim credit for sales that would have happened anyway, and they double-count when several channels each report the same order. It also ignores customer lifetime value, so a campaign with weak ROAS that brings in loyal repeat buyers can be worth more than a high-ROAS campaign of one-time discount hunters. Read it next to customer acquisition cost and margin, never on its own.