E-commerce Glossary

ROAS (Return On Ad Spend)

Revenue generated per dollar spent on advertising.

ROAS is the fundamental metric of advertising performance. Formula: ROAS = Revenue Generated / Ad Spend. A ROAS of 3 means every ad dollar returns $3 in revenue. Caution: a high ROAS doesn't guarantee profitability if margins are low. Your target ROAS depends on your gross margin. With 60% margin, a ROAS of 2 is enough to be profitable. With 30% margin, you need to aim for a ROAS of 4 minimum.

Related terms

AOV (Average Order Value)Average amount spent per order in your store.See definition ARPU (Average Revenue Per User)Average revenue generated per user over a given period.See definition Blended CACAverage acquisition cost including all marketing channels.See definition Blended ROASOverall return on all advertising spend combined.See definition CAC (Customer Acquisition Cost)Total cost to acquire a new customer.See definition Churn RatePercentage of customers lost over a given period.See definition

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