Google Ads glossary

ROAS

In one sentence

ROAS, short for return on ad spend, is the value of the conversions you got (sales, quote requests) divided by what you spent on advertising.

How ROAS is calculated

ROAS = conversion value ÷ cost. In Google Ads, a target ROAS is set as a percentage: 500% means $5 in sales for every $1 spent.

ROAS compares revenue with spend: it ignores your margin. With a 25% margin, you need a ROAS of at least 400% to avoid losing money. Google Ads also offers a “target ROAS” bid strategy, which sets bids to get close to your goal.

Why it matters in Google Ads

ROAS judges a campaign after the fact. It says nothing about the clicks with no chance of buying that you already paid for, or the ones you have not paid for yet.

Two levers raise it: the value of each conversion, and the share of your clicks that can convert. Sorting keywords by intent before you bid works on the second.

A concrete example

Say an online store spends $2,000 on ads and gets $8,000 in sales: its ROAS is 4, or 400%. With a 25% margin, it earns $2,000 in margin for $2,000 of advertising, so it breaks even.

Free tool: ROAS calculator

What ROAS do you need to turn a profit?

The calculator gives your ROAS, the break-even ROAS, the maximum cost per acquisition and the maximum CPC, from your margin.

Open the ROAS calculator