---
title: "Return on ad spend (ROAS): definition and formula"
description: "Revenue attributed to advertising divided by what the advertising cost. A revenue ratio: it says nothing about whether the orders made money."
url: https://offersuite.io/glossary/return-on-ad-spend
updated: 2026-10-13
---

# Return on ad spend (ROAS)

Revenue attributed to advertising divided by what the advertising cost. A revenue ratio: it says nothing about whether the orders made money.

## In plain words

Return on ad spend is revenue divided by the ad spend that produced it. A ROAS of 3 means three dollars of sales for every dollar of ads. Ad platforms report it by default, which is why it is the most quoted number in acquisition.

It is a ratio of revenue, and revenue is not what you keep. An offer that gives away margin to convert, with deep discounts, gifts and free shipping, raises ROAS and can lower profit. Two campaigns with the same ROAS can differ completely in what they earn if they sell different offers.

## Formula

- ROAS = revenue attributed to the ads ÷ ad spend
- Margin per ad dollar = contribution margin of those orders ÷ ad spend

## Worked example

$18,000.00 of ads over six months acquires coffee subscribers who, with their renewals, bring in $94,814.41 of revenue within twelve months. That is a ROAS of 5.27.

The engine puts the margin on those orders at 1.49 times the ad spend. The spend comes back, with $8,806.67 over.

### The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)

Revenue

$40.00

Cost of goods

−$12.00

Pick and pack

−$1.18

Packaging

−$0.50

Shipping label

−$7.50

Card fee per order

−$0.30

Refunds

−$2.00

Card processing

−$1.16

Contribution margin

$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

## A ROAS above 1 is not a profit

Revenue of twice the ad spend sounds like a gain. If the orders keep 38% of their revenue, a ROAS of 2 returns 76 cents of margin for each dollar spent. Break-even is where margin equals spend, and that is a ROAS well above 1.

## Using it

Know your break-even ROAS for each offer and judge campaigns against that. A fixed target across the whole account misleads. Be clear which revenue is counted: first orders only, or renewals too, and over how many months. Where you can, replace ROAS with margin per ad dollar, which already has the offer's costs in it.

## In Offer Suite

Offer Suite's spending plan reports margin per dollar of ad spend, which counts what the orders keep, in place of a revenue ratio.

Source: Offer Suite's offer simulator.

## Related

- [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary)
- [Calculator **Subscription payback calculator: CAC and churn** How much a subscriber's first order loses against what you paid to acquire them, how many renewals it takes to earn that back with churn, and in which month.](https://offersuite.io/calculators/subscription-payback)
- [Calculator **Offer option calculator: profit per visitor** Compare up to three offer options on profit per visitor, margin per order times conversion, and see the conversion lift each one needs to match the best.](https://offersuite.io/calculators/offer-option-profit-per-visitor)
- [Glossary **Break-even ROAS: definition, formula and example** The return on ad spend at which an order's margin exactly pays for the ads that won it: one divided by the contribution margin ratio.](https://offersuite.io/glossary/break-even-roas)
- [Glossary **Customer acquisition cost (CAC): definition** What it costs to win one new customer: spend divided by customers won, or the cost of a visitor divided by the share of visitors who buy.](https://offersuite.io/glossary/customer-acquisition-cost)
- [Glossary **Contribution margin ratio: definition and formula** Contribution margin as a share of revenue. It says how much of each dollar of sales an order keeps, and how fast a discount eats it.](https://offersuite.io/glossary/contribution-margin-ratio)