What Is ROAS?

ROAS = revenue from ads / ad spend.

It answers one question: for every dollar I put into ads, how many dollars of sales came back? A ROAS of 3 means $3 of sales for every $1 of ads. Written as a percent, that is 300%.

Google uses the same sum in its own help pages. Its example: a store wants $5 of sales for each $1 it spends on ads, so it sets a target ROAS of 500%. $5 / $1 x 100% = 500%.

In Google Ads, revenue is called conversion value. It is the value your conversion tracking sends with each sale, usually the order total. So ROAS in Google Ads is conversion value divided by cost.

Two things follow from that. First, Google's ROAS is only as good as your tracking. If a sale is not tracked, it is not in the number. Second, Google only counts the sales it can tie to its own ads. Your store-wide number across every channel is a different sum, called blended ROAS.

Google's Target ROAS bid strategy uses the same idea. Google describes the target as "the average conversion value (for example, revenue) you'd like to get for each dollar you spend on ads."

ROAS counts revenue, not profit. A ROAS of 4 sounds great, but if the product costs you 80% of its price to make and ship, you lose money on every sale.

That is why every store needs its break-even ROAS: 1 divided by your gross margin. With a 40% margin, break-even ROAS is 1 / 0.40 = 2.5. Above 2.5 you make money on ads before other costs. Below it, you pay to sell.

Made-up example: a store spends $2,000 and gets $7,000 in sales. ROAS is 3.5. Its margin is 40%, so break-even is 2.5. It is 1.0 above break-even, so the ads pay.

There are only two levers: more revenue from the same spend, or less spend for the same revenue. In the order most stores should pull them:

Fix tracking first. A sale Google cannot see lowers your ROAS on paper and confuses the bidding. Enhanced conversions can help Google count more of your real sales.

Cut the spend that never sells. Search terms and products that eat budget with no sales drag ROAS down. Negative keywords and splitting products by margin fix most of it.

Raise what each sale is worth. Bundles, higher-priced best sellers and better product pages raise conversion value without more clicks.

Only then touch bids. A higher ROAS target can mean fewer sales overall, because Google bids less on searches it is less sure about. Google warns that a target set too high may limit your traffic.

Scaley Consultant answers ROAS questions from a screenshot of your report, with nothing to connect. Scaley Media Buyer reads your live Google Ads account, read-only, and answers when you ask. Scaley Suite sorts every product by margin and speed of sale, and proposes cuts and budget moves with the reason, each one waiting for your yes.

Scaley works on Google Ads only, not Meta or TikTok. If you also spend on Meta or TikTok, your store-wide ROAS has to come from your own store reports, not from any one ad platform.