Marketing
ROI vs ROAS: Break-Even ROAS from Your Margin
The difference between ROI and ROAS, how to get the break-even ROAS from your gross margin, a table by margin, and a worked campaign where a 2.5 ROAS still loses money.
By TooleemPublished Facts checked
Short answer
ROAS measures how much revenue each dollar of advertising brings in (revenue ÷ ad spend); ROI measures how much profit is left after you get the investment back ((profit − investment) ÷ investment). A ROAS of 4 can be a positive ROI or a loss, depending on your margin. Your break-even ROAS is 1 ÷ margin: with a 35% gross margin you need a ROAS of at least 2.86 just to cover the ads.
Do the calculation
ROAS Calculator
Work out a campaign’s ROAS and compare it with the break-even ROAS your margin requires.
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Two metrics, two different questions
| Metric | Formula | Answers | Usually written as |
|---|---|---|---|
| ROAS | attributed revenue ÷ ad spend | How much do I sell for each dollar of advertising? | 4 (or 400%) |
| ROI | (profit − investment) ÷ investment | How much do I earn on top of what I put in? | 40% |
ROAS uses revenue, which still contains the cost of the product, shipping and payment fees. ROI uses profit. That is why a high ROAS does not guarantee a profitable campaign.
The same campaign, measured both ways
Worked example
Online store with a 35% gross margin
- Ad spend: $2,000. Attributed revenue: $8,000.
- ROAS = 8,000 ÷ 2,000 = 4.
- Gross profit on those sales = 8,000 × 35% = $2,800.
- Profit after paying for the ads = 2,800 − 2,000 = $800.
- Campaign ROI = 800 ÷ 2,000 = 40%.
If the same campaign had brought in $5,000, the ROAS would be 2.5, which sounds fine, but the gross profit ($1,750) would not cover the $2,000 of ads: a $250 loss.
Your break-even ROAS by margin
break-even ROAS = 1 ÷ gross margin (as a decimal)
| Gross margin | Break-even ROAS | Revenue needed per $100 of ads |
|---|---|---|
| 10% | 10.00 | $1,000 |
| 20% | 5.00 | $500 |
| 25% | 4.00 | $400 |
| 30% | 3.33 | $333 |
| 35% | 2.86 | $286 |
| 40% | 2.50 | $250 |
| 50% | 2.00 | $200 |
| 60% | 1.67 | $167 |
| 70% | 1.43 | $143 |
That minimum only pays for the advertising. For the campaign to help with fixed costs and leave a profit, your target ROAS has to sit above it. Work out your real margin with the profit margin calculator.
Common mistakes
- Comparing ROAS across products with different margins. A ROAS of 3 is excellent at a 60% margin and a loss at 25%.
- Counting sales tax or VAT in revenue. The tax is not yours: use net revenue.
- Forgetting returns. If 15% of orders come back, your real ROAS is 15% lower than the ad platform shows.
- Trusting platform attribution alone. Every ad network claims the sale; added together they often exceed your real sales.
- Ignoring repeat customers. A first-order ROAS below break-even can still pay off if customers come back, but make that call with data, not hope.
For the ROI of any investment, not only advertising, use the ROI calculator.
Do the calculation
ROAS Calculator
Work out a campaign’s ROAS and compare it with the break-even ROAS your margin requires.