Definition
ROAS (return on ad spend) is the revenue generated by advertising divided by the cost of that advertising, often written as a ratio or percentage.
ROAS explained
If a campaign spends one unit of currency and brings in four units of tracked revenue, its ROAS is 4:1, sometimes written as 400 percent. It is the main efficiency measure for e-commerce and other businesses that can track the value of each sale.
ROAS is not profit. A 4:1 ROAS can lose money for a business with thin margins and high fulfilment costs, while 2:1 might be very profitable for one with high margins or strong repeat purchases. Work out your break-even ROAS from your margins, then set targets above it.
In Google Ads, Target ROAS is a Smart Bidding strategy that sets bids to maximize conversion value at the return you specify, and Performance Max campaigns often use it. It depends on accurate conversion values being passed to Google Ads, including refunds and, ideally, profit margins where the setup allows.
Example
Your online store's Shopping campaign reports a 5:1 ROAS, while a brand campaign reports 12:1. Checking margins and new-customer rates shows the Shopping campaign brings far more new customers, so a lower ROAS target there is the right decision for growth.
Why it matters
ROAS links ad spend to revenue, and measured against your margins it shows which campaigns are worth scaling.
Related service
Google Ads Management
Search, Shopping and Performance Max campaigns built around tracked conversions and cost per acquisition.
Google Ads management servicesSources
- Google Ads Help: About Smart Bidding (checked 30 Sep 2026)
Published by Vidern, founded and led by Malhar Shah. Updated .
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Related terms
- CPA (Cost Per Acquisition)CPA (cost per acquisition) is the average advertising cost to win one conversion, such as a sale, sign-up or lead: total ad spend divided by conversions.
- Smart BiddingSmart Bidding is a set of Google Ads bid strategies that use Google AI to set bids in each auction to maximize conversions or conversion value.
- Performance MaxPerformance Max is a goal-based campaign type that uses automation to run Google ads across Search, YouTube, Display, Discover, Gmail and Maps.
- Conversion trackingConversion tracking records valuable actions people take after seeing your ads or visiting your site, such as purchases, sign-ups, calls or leads.
- AttributionAttribution is how credit for a conversion is shared among the marketing touchpoints, such as searches, ads, emails and referrals, that led to it.