What is ROAS?

ROAS (Return On Ad Spend) measures the revenue generated for every euro spent on advertising. It's THE essential metric for evaluating the profitability of your Google Ads campaigns.

ROAS Formula:

ROAS = (Revenue generated by advertising / Advertising cost) × 100

Concrete Example:

Advertising spend: €2,000

Revenue generated: €10,000

ROAS = (10,000 / 2,000) × 100 = 500%

This means for every euro invested, you get €5 in revenue back.

ROAS vs ROI: What's the Difference?

Metric	Formula	What it measures
ROAS	Revenue / Ad spend	Advertising efficiency
ROI	(Profit - Investment) / Investment	Overall profitability

Important: A 500% ROAS doesn't mean 400% profit. ROI takes into account product costs, margins, and operational expenses.

Calculating Real ROI

ROI = ((Revenue - Product cost - Ad cost) / Ad cost) × 100

Example with 50% margin:

Revenue: €10,000

Product cost (50%): €5,000

Ad cost: €2,000

Net profit: 10,000 - 5,000 - 2,000 = €3,000

ROI = (3,000 / 2,000) × 100 = 150%

What is a Good ROAS?

Minimum Profitable ROAS

The minimum ROAS depends on your gross margin:

Gross Margin	Minimum ROAS	Target ROAS
20%	500%	700%+
30%	333%	500%+
40%	250%	400%+
50%	200%	300%+
60%	167%	250%+
70%	143%	200%+

Minimum ROAS Formula:

Minimum ROAS = 100 / Gross margin (%)

ROAS Benchmarks by Industry (2025)

Industry	Average ROAS	Top 25%
Fashion & Accessories	450%	700%+
Electronics	350%	550%+
Home & Decor	400%	600%+
Beauty & Cosmetics	500%	800%+
Food & Beverage	300%	500%+
B2B Services	400%	700%+
SaaS	500%	1000%+
Travel	350%	600%+

How to Improve Your ROAS

1. Optimize Targeting

Keywords:

Prioritize high purchase intent keywords

Exclude irrelevant keywords (negatives)

Test exact match vs phrase match

Audiences:

Create remarketing audiences

Exclude existing customers if not relevant

Use similar audiences

2. Improve Ads

Key Elements:

Include keyword in headline

Highlight main benefit

Add clear call-to-action

Use all extensions

A/B Testing:

Test 3-5 ad variations per group

Let them run for minimum 2 weeks

Keep winners, iterate on losers

3. Optimize Bidding

Recommended Strategies:

Start: Maximize conversions (to collect data)

Then: Target ROAS (once you have 30+ conversions/month)

Bid Adjustments:

Increase on mobile if performance > desktop

Reduce low-performing hours

Exclude unprofitable geographic areas

4. Improve Landing Page

Essential Criteria:

Load time < 3 seconds

Message consistent with ad

CTA visible without scrolling

Social proof (reviews, client logos)

Mobile-first design

5. Optimize Average Cart Value

Techniques:

Upsell and cross-sell

Free shipping threshold

Bundles and packs

Limited-time offers

Calculating Your Target ROAS

Method 1: From Margin

Target ROAS = 100 / (Gross margin % × Profit objective %)

Example:

Gross margin: 40%

Profit objective on ads: 50% of margin (so 20%)

Target ROAS = 100 / 20 = 500%

Method 2: From Target CPA

Target ROAS = (Average order value / Target CPA) × 100

Example:

Average cart: €80

Target CPA: €20

Target ROAS = (80 / 20) × 100 = 400%

Mistakes That Kill ROAS

Mistake #1: Incomplete Tracking

Problem: You're not tracking all conversions

Solution: Configure Enhanced Conversions, verify Conversion Linker

Mistake #2: Incorrect Attribution

Problem: Last-click model ignores customer journey

Solution: Switch to data-driven model

Mistake #3: No Segmentation

Problem: Calculating global ROAS without segmenting

Solution: Analyze ROAS by campaign, product, audience

Mistake #4: Ignoring LTV

Problem: Only looking at first conversion

Solution: Integrate customer lifetime value in calculation

Conclusion

ROAS is essential but insufficient alone. To truly optimize your Google Ads campaigns:

Calculate your minimum profitable ROAS

Benchmark vs your industry

Segment your analyses

Integrate LTV for recurring businesses

Test and optimize continuously

Need help improving your ROAS? Our experts increased our clients' average ROAS by 47% in 2024. [Request your free audit](/en/contact).

How to Calculate Your Google Ads ROAS: Practical Guide + Calculator