ROAS is the revenue generated by every real invested in media. The formula is simple; what separates a profitable operation from a busy one is knowing which ROAS your business needs to reach to cover its costs.
What ROAS is
ROAS (Return on Ad Spend) measures the direct return on ad investment. It is a media efficiency metric, not a business profit metric, because it ignores product cost, operations, and team.
How to calculate ROAS
ROAS = revenue attributed to campaigns ÷ media investment. If you invested R$ 10,000 (reais, Brazil's currency) and generated R$ 40,000 in attributed revenue, your ROAS is 4, or 400%.
- Define the period (the same window for both revenue and spend).
- Add up gross spend, including platform fees.
- Add up the revenue from sales attributed to that spend.
- Divide revenue by spend.
Revenue always needs to come from the same source of truth. Mixing checkout revenue with platform-reported conversions is the most common mistake, and it depends directly on your attribution model.
What is your business's minimum ROAS
There is no universal "good" ROAS. The number that matters is the breakeven ROAS, which depends on your contribution margin:
Breakeven ROAS = 1 ÷ contribution margin. At a 25% margin, the breakeven point is ROAS 4. At a 60% margin, it is ROAS 1.67.
| Contribution margin | Breakeven ROAS | Target ROAS for profit |
|---|---|---|
| 20% | 5.0 | above 6.0 |
| 30% | 3.3 | above 4.0 |
| 50% | 2.0 | above 2.5 |
| 70% | 1.4 | above 1.8 |
ROAS, ROI, and CAC: which to use for each decision
- ROAS: short-term media efficiency. Use it to decide on campaigns, creatives, and channels.
- ROI: return accounting for all costs. Use it to decide whether a channel is worthwhile for the company.
- CAC and LTV: a customer's value over time. Use it to decide how much you can afford to pay for an acquisition, a topic covered in depth in the guide to CAC and LTV.
How to improve ROAS without cutting spend
Levers in order of impact
- Raise the landing page's conversion rate: more revenue from the same click.
- Raise average order value with combos, upsells, and strategic shipping offers.
- Cut audiences and search terms that consume budget without generating revenue.
- Reduce measurement data loss so real revenue is not underestimated.
- Re-engage your own base through email and WhatsApp, diluting media cost.
In ecommerce, the fastest lever is usually at the bottom of the funnel: reviewing the checkout and abandoned cart recovery changes ROAS without touching a single campaign line.
Common calculation mistakes
- Using gross revenue with high returns and ignoring net revenue.
- Adding ROAS from different platforms and dividing by two.
- Evaluating top-of-funnel campaigns with a one-day attribution window.
- Comparing months with completely different product mix and seasonality.
- Optimizing ROAS by cutting volume: the ratio improves and revenue drops.
Need media that actually pays off?
KCLOCK runs media with a ROAS target set from your margin, not from a market average. Check out KCLOCK's paid traffic management and request a diagnostic through the form.
Frequently asked questions about how to calculate roas
What is the ROAS formula?
ROAS is the revenue generated by ads divided by ad spend over the same period. A ROAS of 4 means four reais of revenue for every one spent.
What is a good ROAS?
It depends on the margin. The minimum ROAS is roughly 1 divided by the contribution margin: at a 25% margin, the breakeven point lands around 4.
Is ROAS the same thing as ROI?
No. ROAS only considers revenue and media spend; ROI considers profit and all costs involved in the operation.
How can I improve ROAS?
By raising the conversion rate and average order value, cutting waste on irrelevant terms, and improving the landing page, not just by cutting spend.
About the author
Kauára Bertoluci
Partner and Head of Strategy & Growth, KCLOCK
Marketing, tracking, and CRO strategist. Leads positioning, funnels, paid media, and measurement across KCLOCK's projects.
- #metrics
- #paid media
- #finance
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