Free tool

ROAS calculator.

Return on ad spend, plus the number most people skip: the break-even ROAS your own gross margin requires. A campaign at 1.4x sounds fine until you work out that a 60 percent margin needs 1.67x just to stand still.

Your numbers

$

What the campaign cost over the period.

$

Revenue you can attribute to that spend.

%

What is left after the cost of serving the customer.

Optional. Paying customers, for cost per acquisition.

Return on ad spend

2.36 x

Break even at your margin

1.18 x

You are above break even. At an 85% margin every dollar of spend needs to bring back $1.18 before you make anything, and this campaign brings back $2.36. That is $1,215.95 of gross profit after the ad spend.

Profit after ad spend

$1,215.95

Gross profit minus what the ads cost

Return on investment

101.0%

Profit as a percentage of spend

Cost per acquisition

$41.52

Spend divided by conversions

Break-even cost per acquisition

$83.45

The most you can pay and still break even

Where the revenue goes
Revenue $2,847.00
Cost of serving $427.05
Ad spend $1,204.00
Left over $1,215.95

The catch

ROAS is a photograph of a moving thing.

Every number on this page is measured at one moment, usually the day of the click. That is the right model for a shop, where the purchase is the whole relationship. It is the wrong model for subscription software, where the first payment is a small fraction of what the customer is worth and a good number of them cancel.

Two consequences worth holding on to. A campaign with a first-month ROAS of 0.5x can be the best thing you do all year, if those customers stay two years. A campaign at 2.4x can lose money, if they leave in week six. Neither of those is visible in the ratio above.

The number that survives both cases is payback period: how many months until the spend has actually come back, with churn taken into account.

Work out your payback period

Questions

ROAS, asked plainly.

What is ROAS?
Return on ad spend: the revenue a campaign produced divided by what it cost. A ROAS of 3x means every dollar spent brought back three dollars of revenue. It is a gross number, so it says nothing about whether you made a profit.
What is a good ROAS?
It depends entirely on your gross margin, which is why the widely repeated "4x is good" rule is unhelpful. The number that matters is your break-even ROAS, which is 1 divided by your gross margin. At an 85 percent margin you break even at 1.18x. At a 40 percent margin you need 2.5x just to stand still.
How do you calculate break-even ROAS?
Divide 1 by your gross margin expressed as a decimal. A gross margin of 85 percent gives a break-even ROAS of 1 divided by 0.85, which is 1.18x. Anything above that is profit on a gross basis; anything below it loses money no matter how good the number looks next to an industry benchmark.
What is the difference between ROAS and ROI?
ROAS compares revenue to ad spend and is a multiple. ROI compares profit to ad spend and is a percentage. ROI is the more honest number because it subtracts both the cost of the ads and the cost of serving the customer, and it can be negative while ROAS still looks respectable.
Why is ROAS misleading for subscription businesses?
Because it is measured at a point in time, usually the day of the click, while subscription revenue arrives over months and some of those customers cancel. A campaign with a first-month ROAS of 0.5x can be excellent if those customers stay for two years, and a campaign at 2x can lose money if they churn in week six. For recurring revenue the useful number is payback period.

Typing one revenue figure into a form gives you one blended ROAS. The version that changes decisions is per campaign, updated as the subscription revenue actually lands. That is what Ripples does. One script tag, your billing provider and your Google Ads account, and these numbers are computed from real data instead of typed in from memory.

See how that works

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