What is Return on Ad Spend (ROAS)?

ROAS measures how much revenue you earn for every dollar spent on advertising. It’s a quick way to understand if your campaigns are profitable.

Imagine if you spend $1,000 on ads and generate $3,000 in revenue, your ROAS is 3.0, meaning you earned 3x what you spent.

How does it work?

The formula is simple:

ROAS = Revenue from ads ÷ Cost of ads

You can calculate ROAS across different levels:

• Campaign-level: Did this specific campaign make money?

• Channel-level: Are Facebook Ads more profitable than TikTok Ads?

• Cohort-level: Are users acquired last month generating strong returns?

What counts as “revenue” depends on your app. For subscription apps, it might be trial starts or recurring revenue. In gaming, it could be in-app purchases. You can also use predicted LTV as a proxy, especially when real revenue takes time to appear.

Why it matters

ROAS is the north star metric for paid user acquisition.

It helps you compare performance across channels, creatives, and audiences. If your ROAS is above 1.0, you’re technically making more than you spend, but whether it’s good enough depends on your margins and goals.

For example, a ROAS of 2.0 might not be enough if your costs are high. But if your LTV is strong and your CAC is low, even a 1.5 could work at scale.

It also helps with budget decisions: scale what’s working, cut what’s not. But always in context, ROAS alone can be misleading if tracked too early or without LTV in mind.