What is a good ROAS?

ROAS is calculated by dividing the revenue generated by your advertising by the total amount spent on that advertising. The formula is straightforward: ROAS = Revenue from Ads ÷ Ad Spend If you spend £5,000 on ads and generate £20,000 in revenue, your ROAS is 4:1 (or simply 4x). This tells you that every pound invested returned four pounds in revenue. However, ROAS alone does not tell you whether a campaign is profitable. Revenue is not profit. To understand true profitability, you need to factor in your cost of goods, fulfilment, overheads, and agency fees. That is where break-even ROAS becomes essential.

Your break-even ROAS is the minimum return you need to cover your costs. The formula is: Break-even ROAS = 1 ÷ Profit Margin For example, if your profit margin is 40% (after product costs, shipping, and overheads but before ad spend), your break-even ROAS is 1 ÷ 0.40 = 2.5x. Any ROAS above 2.5x is profitable. Anything below it means you are losing money on each sale driven by ads. Here is how break-even ROAS changes with margin: - 20% margin: break-even ROAS of 5.0x - 30% margin: break-even ROAS of 3.3x - 40% margin: break-even ROAS of 2.5x - 50% margin: break-even ROAS of 2.0x - 60% margin: break-even ROAS of 1.7x This is why blanket ROAS targets are misleading. A 3x ROAS is excellent for a software company with 80% margins, but it could be loss-making for a low-margin product business.

Different advertising platforms deliver different ROAS ranges because they capture demand at different stages of the buying journey. Google Search Ads tend to deliver the highest ROAS, typically 4-8x, because users are actively searching for products or services. The intent is already there. Google Shopping also performs well, usually in the 4-6x range for ecommerce brands. Meta Ads (Facebook and Instagram) typically deliver 2.5-4x ROAS. This is lower than Google Search because Meta is a demand-generation platform. Users are not searching for your product - you are interrupting their feed with something compelling enough to make them act. The ROAS appears lower, but Meta often introduces new customers who would never have found you through search. TikTok Ads generally deliver 1.5-3x ROAS, though this varies significantly by vertical and creative quality. The platform is still maturing for direct response, but it can be highly effective for brands targeting younger demographics. These benchmarks are general ranges. Performance varies dramatically by industry, average order value, creative quality, and targeting strategy.

ROAS is one metric, not the only metric. Optimising exclusively for ROAS can lead to underinvestment in growth. High-ROAS campaigns often target people who were already going to buy - brand searches, retargeting existing site visitors, or remarketing to warm audiences. These campaigns look efficient but they are not driving incremental growth. They are taking credit for conversions that would have happened anyway. Meanwhile, the campaigns that build your brand and introduce new customers - prospecting on Meta, top-of-funnel video, awareness campaigns - will almost always show lower ROAS. But these are the campaigns that grow your customer base. The best-performing brands track ROAS alongside other metrics: cost per acquisition (CPA), customer lifetime value (LTV), new customer acquisition rate, and blended marketing efficiency ratio (MER). A campaign with a 2x ROAS that brings in customers with a high LTV can be far more valuable than a 6x ROAS campaign that only retargets existing customers. Attribution also complicates ROAS measurement. Platform-reported ROAS is rarely 100% accurate. Meta, Google, and TikTok all claim credit for conversions, often for the same sale. Server-side tracking, post-purchase surveys, and incrementality testing provide a more honest picture.