Verified Mathematical Model & Formulation
ROAS = Revenue from Ads / Total Ad Spend Break-Even ROAS = 1 / Profit Margin (before ad spend)
Calculates the ratio of revenue generated to advertising capital spent. Identifies your break-even ROAS threshold, below which ads lose money.
Configurable Parameters & Standard Units
- Total Ad Spend ($): (Default: 2000 usd)
- Attributed Sales Revenue ($): (Default: 7500 usd)
- Product Margin Before Ads (%): (Default: 65 percent)
Standard Worked Example & Practical Verification
Scenario: Spent $5,000 on Facebook ads generating $18,000 in revenue with a 60% gross product margin.
Calculated Solution
3.60x ROAS (Profitable by 1.93x above break-even)
Practical Takeaway: The ad campaign generated $5,800 in net profit.
Frequently Asked Questions
What is a good ROAS in e-commerce?
It depends entirely on your margins. A high-margin digital product can profit at 1.5x ROAS, whereas a low-margin retail item with 25% margins requires a 4.0x ROAS to break even.