ROAS (Return on Ad Spend)
Return on Ad Spend is the ratio of revenue generated by ads to the ad spend, expressed as a multiplier. A ROAS of 4× means $4 of revenue for every $1 of ad spend.
ROAS = ad-attributed revenue / ad spend. It is the most commonly quoted efficiency metric in paid advertising. Break-even ROAS depends on your gross margin — at 50% margin, 2× ROAS is break-even on contribution; at 70% margin, break-even is around 1.45×.
'Target ROAS' is the ROAS that hits your profitability goal after cost of goods, fulfillment, and overhead. Setting target ROAS too high caps growth; too low burns cash. Most DTC brands target 2.5–4× blended ROAS.
ROAS is reported ROAS — what the ad platform says. iROAS (incremental ROAS) is what the ads actually caused, measured via holdout or incrementality test. iROAS is lower than ROAS, often significantly. Run iROAS tests at least quarterly and discount reported ROAS accordingly when making budget decisions.