How to calculate ROAS for your ad campaigns?

ROAS is the most widely used ad performance indicator in e-commerce. It directly measures the return on every euro spent on advertising platforms like Meta Ads, Google Ads or TikTok Ads. The formula is simple: ROAS = Revenue generated by advertising / Advertising spend. The result is a ratio expressing the revenue obtained per euro invested.

To calculate a reliable ROAS, first define the analysis period (day, week, month) and retrieve the revenue attributed to your campaigns from the platform or your attribution tool. Then divide this revenue by the total ad spend over the same period. Be careful to use revenue excluding VAT to obtain a figure consistent with your ad costs, which are also ex-VAT.

A good ROAS depends on your gross margin and the cost structure of your business. For a store with 50% gross margin, the break-even ROAS is 2. Below that, you lose money on every sale. To be profitable after all other costs (shipping, transaction, operational), you generally need to target a minimum ROAS of 3 to 4 depending on your sector.

However, ROAS has a significant limitation: it only measures revenue, not actual profit. This is why POAS (Profit On Ad Spend) is becoming the reference metric for demanding e-commerce operators. POAS integrates all costs and gives you the true profitability of your ad campaigns, enabling better budget allocation decisions.