Return on ad spend is the revenue generated for every dollar spent on advertising. You divide revenue attributed to ads by the ad spend. A ROAS of 4 means four dollars of revenue per dollar spent. It measures advertising efficiency but ignores delivery costs and margin.

ROAS is a revenue ratio, not a profit ratio, and that distinction trips up a lot of founders. A 4x ROAS can still lose money if your margins are thin or the cost to deliver is high. Translate ROAS into CAC and check it against the margin before deciding a channel is working. Revenue per dollar is not profit per dollar.

Example:

 You spend $10,000 on ads and attribute $40,000 in revenue. ROAS is $40,000 / $10,000 = 4x.

What is a good ROAS?

 It depends on your margin. A business with thin margins needs a higher ROAS to profit than one with high margins. Always interpret ROAS against your unit economics.

What is the difference between ROAS and ROI?

 ROAS measures revenue per ad dollar. ROI measures profit relative to total cost, accounting for margin and other expenses, making it a fuller profitability measure.