Why can a healthy ROAS still lose money?
ROAS is the number Google Ads and Meta show you, so it is the number owners chase. Two things to know about it. It is revenue, not profit, so a ROAS that looks healthy can lose money once the product is paid for. And it counts only the sales the platform could see, so broken tracking makes it wrong in either direction.
Used well, ROAS is a quick read on whether a campaign is in the right range. The verdict on whether the marketing made money is marketing ROI, which takes the margin and the other costs into account. The guide, Marketing ROI vs ROAS, covers the difference. The short version: ROAS is the diagnosis, ROI is the verdict.
What does a ROAS of 3 look like in dollars? (example figures)
An online homewares shop spends $3,000 on Meta ads in a month and the ads produce $9,000 of orders. ROAS is 3. The shop's gross margin after stock and shipping is 40 percent.
| ROAS | Revenue | Gross profit at 40 percent | After the $3,000 of ads |
|---|---|---|---|
| 2 | $6,000 | $2,400 | $600 behind |
| 2.5 | $7,500 | $3,000 | Break even |
| 3 | $9,000 | $3,600 | $600 ahead |
| 4 | $12,000 | $4,800 | $1,800 ahead |
At a 40 percent margin, a ROAS of 2.5 is break-even: the ads paid for themselves and nothing else. The sum for any business is 1 divided by the gross margin. A 25 percent margin needs a ROAS of 4 to break even. A 60 percent margin breaks even at 1.67. Two shops with the same ROAS of 3 can be one shop making money and one losing it, and the difference is the margin, which the ad platform never sees.
What number should sit next to ROAS?
Before you judge a ROAS, write your break-even ROAS beside it. If you do not know your gross margin, take last month's sales, subtract what the goods and the delivery cost, and divide by the sales. A ROAS without a margin beside it says nothing, and a ROAS target set without one is a target for revenue, not for profit.
What does Cora do with ROAS?
Once Google Ads and Meta are connected, CoraVision reads each campaign's spend and conversion value every night, which is what ROAS is made of. A ROAS target can be one of the items in your Marketing Performance score, and your Trust Score says how far the number can be trusted, because a ROAS built on half-connected tracking is a guess.
Questions
What is the difference between ROAS and ROI?
ROAS is revenue divided by ad spend. ROI is profit, after every cost, divided by the cost. A campaign can have a ROAS of 2 and a negative ROI.
What is a good ROAS?
One above your break-even ROAS, which is 1 divided by your gross margin, with enough room to pay the rest of the business. There is no number that is good for every business, because the margin is different for every business.
Why does Meta show a different ROAS from my Shopify sales?
Meta counts the orders it can see and credits itself for orders it touched, under its own attribution rules. Shopify counts every order. The gap is tracking and attribution.