Glossary
Return on ad spend.
ROAS is the revenue your ads bring back per unit of ad money — a 4× ROAS means $4 back for every $1 spent. Whether that is good depends entirely on your gross margin.
ROAS = revenue from ads ÷ ad spend
gross margin 40%
at 40% margin you need at least 2.5× just to break even — $2.50 back for every dollar of ads.
Why 4× can still lose money
ROAS counts revenue, and revenue is not money you keep. At a 20% gross margin, a 4× campaign turns $1 of ads into $4 of sales — but only $0.80 of gross profit, leaving the campaign twenty cents underwater before a single overhead. That is the arithmetic behind breakeven ROAS: one divided by your gross margin. A 50% margin breaks even at 2×; a 25% margin needs 4× just to stand still. Be careful, too, about whose number you are reading: platform-reported ROAS credits the platform's own ads generously, while blended ROAS — all revenue over all ad spend — is the one that has to survive your accountant.
ROAS or CAC?
ROAS is a campaign ratio; CAC is the price of a customer. The difference matters because ROAS sees only the first transaction — it is blind to lifetime value. A campaign that merely breaks even on the first order can still be your best one, if those customers come back to buy again. Judge one-off products on ROAS; judge anything with repeat purchases on CAC against LTV. Either way, keep margin in the denominator of your thinking — a ROAS target set without it is a number picked from the air.
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