Return on Ad Spend (ROAS) measures advertising efficiency by dividing revenue generated by ad costs. A ROAS of 4x means $4 in revenue for every $1 spent on ads. This metric helps evaluate and compare performance across advertising channels and campaigns.
Acceptable ROAS varies by margin structure. A brand with 80% gross margin can profitably run at 2x ROAS, while a 40% margin business needs 4x or higher. Understanding your unit economics is essential for setting ROAS targets.
ROAS alone doesn't capture full advertising value. It typically measures immediate revenue, not lifetime value of acquired customers or brand-building effects of awareness campaigns. Smart marketers consider both short-term ROAS and longer-term metrics.