What is ROAS (Return on Ad Spend)?
ROAS is revenue generated divided by advertising spend, usually expressed as a ratio or percentage. A ROAS of 400% (or 4:1) means $4 of revenue for every $1 spent. It is the primary efficiency metric for e-commerce and revenue-attributable campaigns, and the target Google's Target ROAS Smart Bidding strategy optimizes toward.
What to know in practice
- ROAS measures gross revenue efficiency, not profit. A 300% ROAS can be unprofitable if your margin is below 33% — always pair ROAS with margin to know if a campaign actually makes money.
- Target ROAS bidding needs sufficient conversion-value data (Google recommends 50+ conversions in the prior 30 days) before it optimizes reliably.
- Setting a Target ROAS too high causes Smart Bidding to under-spend protectively; too low causes indiscriminate spend. Start at your historical account ROAS and adjust ~10%/week.
- For lead-gen (non-ecommerce), ROAS only works once offline conversion values are imported — otherwise there's no revenue figure for Google to optimize against.
Common misconception
A higher ROAS is not always better. A very high ROAS often means you're under-spending and leaving profitable volume on the table. The goal is the ROAS that maximizes total profit, not the highest possible ratio.
Related terms
- Smart Bidding → Paid Media
- Offline Conversions → Paid Media
- Performance Max → Paid Media