Also called ROAS
Return on ad spend is revenue divided by advertising cost, expressed as a multiple — a ROAS of 3 means three euros back for each one spent.
ROAS measures revenue, not profit, and that distinction is where most people are misled by it. A ROAS of 3 on a product with a 25% margin loses money; the same ROAS on a digital product with 90% margins is comfortable.
The break-even multiple is simply the inverse of the gross margin. At 60% margin you need a ROAS above 1.7 before advertising contributes anything, and knowing that number before launching a campaign prevents most of the disappointment.
Attribution windows change it dramatically. The same campaign reports very different ROAS at one day and at twenty-eight, so the window has to be stated whenever the figure is.
In practice
€500 spent producing €1,750 of sales is a ROAS of 3.5 — genuinely good for a digital product, marginal for something with physical costs.
Common mistake
Comparing your ROAS to someone else's without knowing their margin or their attribution window. The number is meaningless without both.
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