ROAS vs ROI: What Is the Difference?
ROAS = Revenue from Ads divided by Ad Spend. Revenue per dollar of ad spend. Platform default metric.
ROI = ((Revenue minus Total Cost) divided by Total Cost) times 100. Actual profit after all costs including COGS.
A 4x ROAS campaign can still be unprofitable. A 30 percent margin retailer needs 3.3x ROAS just to break even on ad spend before other operating costs.
The Ad Spend ROI Formula
Ad Spend ROI percent = ((Gross Profit from Ads minus Ad Spend) divided by Ad Spend) times 100
Where: Gross Profit = Revenue times Gross Margin percent
3 Worked Examples
Example 1: Google Search Ads (eCommerce)
Ad spend: $2,000. Revenue: $8,000. 45 percent gross margin. Gross profit = $3,600. ROI = 80 percent. ROAS = 4x. Profitable but margin-constrained.
Example 2: Facebook Retargeting
Ad spend: $500. Revenue: $2,500. 45 percent gross margin. Gross profit = $1,125. ROI = 125 percent. ROAS = 5x. Retargeting captures pre-existing intent.
Example 3: LinkedIn B2B Ads
Monthly spend: $3,000. 15 leads at 20 percent close = 3 clients at $5,000 ACV = $15,000. 70 percent GM. Gross profit = $10,500. ROI = 250 percent. High CPL justified by high CLV.
Attribution Models and How They Affect ROI
| Model | How It Works | Best For |
|---|---|---|
| Last-click | 100 percent credit to final touchpoint | Simple funnels |
| First-click | 100 percent credit to first touchpoint | Awareness campaigns |
| Linear | Equal credit across all touchpoints | Multi-touch B2B journeys |
| Data-driven | ML assigns credit by conversion patterns | High-volume Google Ads accounts |
Last-click (platform default) overstates bottom-of-funnel channels. Use consistent attribution when comparing ROI across channels.
When to Kill a Campaign
- Negative ROI after 3-5x target CPA spend. The data is clear — cut it.
- Payback period exceeds cash flow capacity. ROI-positive on paper but cash-negative for months is unsustainable.
- Opportunity cost too high. Redeploy if same budget delivers 3x the ROI elsewhere.
- Volume ceiling reached. More spend only increases CPCs — find a new channel.
What Is a Good Ad Spend ROI?
| Channel | Typical ROI Range |
|---|---|
| Google Search | 100-300 percent |
| Google Shopping | 80-250 percent |
| Facebook / Instagram | 50-200 percent |
| LinkedIn Ads | 50-300 percent (high CPL, high CLV in B2B) |
For paid channels, ROI above 100 percent is the minimum viable threshold. Below that, you are destroying value.
Related Calculators
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