ROAS (Return on Ad Spend)
Revenue divided by ad spend — the most reported and most misleading paid metric.
Return on Ad Spend (ROAS) is revenue attributed to advertising divided by ad spend. A 3x ROAS means $3 of attributed revenue for every $1 spent on ads.
Context
ROAS is universally reported in ad platforms because it's simple and platform-friendly. It's also structurally misleading for most businesses because it typically uses gross revenue (not net of COGS, returns, or discounts) and over-credits the platform via generous attribution windows.
Better metrics for most businesses: new-customer contribution margin, CAC payback window, and blended MER (Marketing Efficiency Ratio). These capture whether the acquisition is actually profitable rather than whether the revenue number is big.
A DTC brand with 35% gross margin reporting a 3.5x ROAS on Meta is often earning 1.2x actual contribution margin — break-even at best — because ROAS ignores COGS, discount codes, and returns. Optimizing hard for a number that overstates reality by 2x is how companies spend themselves into unprofitability.
Platform-reported ROAS almost always overstates incremental impact by 20–40% due to attribution windows (7-day click, 1-day view on Meta) that credit conversions that would have happened anyway.
Related terms
Services that apply this
More Paid Media terms
CAC Payback Window
The number of months until a new customer's contribution margin equals the cost to acquire them.
CPM (Cost per Mille)
Cost per 1,000 impressions — the core pricing unit for paid media.
CPC (Cost per Click)
The cost of a single click on a paid advertisement.
CPA (Cost per Action/Acquisition)
The average ad cost per conversion event — the core paid efficiency metric.