ROAS vs ROI: What's the Difference and Which Should You Track?

ROAS vs ROI: What's the Difference and Which Should You Track?

If you're running Google Ads, you've likely seen both ROAS and ROI mentioned. While they sound similar, they measure different things. ROAS (Return on Ad Spend) focuses purely on ad revenue, while ROI (Return on Investment) accounts for all costs. This article breaks down the differences, shows you how to calculate each, and helps you decide which to track.

What Does ROAS Mean?

ROAS stands for Return on Ad Spend. It measures the gross revenue generated for every dollar spent on advertising. The formula is:

ROAS = Revenue from Ads / Cost of Ads

For example, if you spend $1,000 on Google Ads and earn $5,000 in revenue, your ROAS is 5:1 (or 500%).

ROAS is a narrow metric—it only looks at ad spend, not other costs like product costs, overhead, or shipping. It's best for evaluating the performance of specific campaigns or ad groups.

How to Calculate ROAS

How to Calculate ROAS Formula

The basic formula is:

ROAS = (Revenue from Ads) / (Cost of Ads)

You can express it as a ratio (e.g., 4:1) or a percentage (e.g., 400%).

How to Calculate ROAS in Google Ads

In Google Ads, you can see ROAS directly if you set up conversion tracking with revenue values. Go to "Campaigns" > "Columns" > "Modify columns" and add "Conv. value / cost"—that's your ROAS.

How to Calculate ROAS in Meta Ads

In Meta Ads Manager, create a custom column: "Purchase Conversion Value" / "Amount Spent." Or use the built-in "Return on Ad Spend" column.

How to Calculate ROAS in Excel

If you export your ad data, create a new column with the formula:

=SUM(Revenue Column)/SUM(Ad Spend Column)

For campaign-level ROAS, use =IF(Ad Spend=0,0,Revenue/Ad Spend).

How to Calculate ROAS in Digital Marketing

The same formula applies across all channels. Just ensure you're using consistent attribution (e.g., last-click or data-driven).

How to Calculate ROAS Break Even

Your break-even ROAS is the minimum ROAS needed to cover your product costs. Calculate it as:

Break-Even ROAS = 1 / (Profit Margin %)

For example, if your profit margin is 25%, your break-even ROAS is 1 / 0.25 = 4 (or 4:1). If your ROAS is below that, you're losing money on ad spend.

How to Calculate Target ROAS

Target ROAS is the ROAS you aim for to achieve your business goals. It's often set higher than break-even. For instance, if you want a 20% profit margin on ad spend, and your break-even is 4:1, your target might be 5:1.

What Is ROI?

ROI (Return on Investment) measures the overall profitability of an investment, including all costs. The formula is:

ROI = (Net Profit / Total Investment) × 100

Net Profit = Revenue – Total Costs (ad spend + product costs + overhead + etc.)

ROI gives a complete picture of profitability. For example, if you spend $1,000 on ads, $500 on product costs, and earn $2,000 in revenue, your net profit is $500, and ROI is ($500 / $1,500) × 100 = 33.3%.

ROAS vs ROI: Key Differences

Metric	What It Measures	Formula	Use Case
ROAS	Revenue per ad dollar	Revenue / Ad Spend	Campaign optimization, ad platform performance
ROI	Overall profitability	(Net Profit / Total Investment) × 100	Business-level decision making

ROAS is a subset of ROI. A high ROAS doesn't guarantee a positive ROI if other costs are high.

How Much Is Good ROAS?

There's no universal "good" ROAS—it depends on your industry and profit margins. According to WordStream 2026 Google Ads Benchmarks, average conversion rates and costs vary widely. For example, the average cost-per-lead (CPL) in the Apparel/Fashion industry is $97.51, while in Automotive Repair it's $29.96. A good ROAS covers your costs and meets your profit goals.

Generally, a ROAS of 4:1 is considered solid for e-commerce, but businesses with thin margins may need 10:1 or higher. Use your break-even ROAS as a baseline.

How Much ROAS Is Good on Amazon?

Amazon's advertising platform has its own benchmarks. While we don't have specific Amazon data, the same principle applies: calculate your break-even ROAS based on your product margins. Many Amazon sellers aim for a ROAS of 3:1 to 5:1, but it varies.

Is ROAS Good?

Yes, ROAS is a valuable metric for optimizing ad campaigns. It helps you quickly identify which campaigns, keywords, or ad sets are generating the most revenue per dollar spent. However, it shouldn't be used in isolation. Always pair ROAS with ROI to ensure overall profitability.

Which Should You Track?

Track both, but for different purposes:

• Use ROAS for day-to-day campaign optimization and channel comparison.
• Use ROI for strategic decisions and evaluating overall business health.

If you're a small business with tight margins, focus on ROI. If you're scaling and want to maximize revenue, ROAS can guide your ad spend allocation.

Practical Takeaway

Start by calculating your break-even ROAS. Then set target ROAS based on your profit goals. Monitor ROAS at the campaign level, but regularly calculate ROI to ensure you're actually making money. Remember, a high ROAS is meaningless if your ROI is negative.

For more benchmarks, refer to the WordStream 2026 Google Ads Benchmarks.