Teams often use ROAS and ROI as if they were the same thing. They are not, and mixing them up can make a losing campaign look healthy.
The formulas
- ROAS = revenue attributed to ads ÷ ad spend
- ROI = (revenue − total cost) ÷ total cost × 100
- Break-even ROAS = 1 ÷ gross margin
A worked example
You spend $2,000 on ads and they bring $8,000 in revenue. Your products have a 35% gross margin, and you also paid $500 for creative and tools.
| Measure | Calculation | Result |
|---|---|---|
| ROAS | $8,000 ÷ $2,000 | 4.0x |
| Gross profit | $8,000 × 35% | $2,800 |
| Total cost | $2,000 + $500 | $2,500 |
| Profit after costs | $2,800 − $2,500 | $300 |
| ROI on marketing profit | $300 ÷ $2,500 | 12% |
A 4x ROAS looks strong, yet after margin and other costs the campaign barely makes money. That is the difference the two metrics reveal.
When to use which
Use ROAS inside ad platforms to compare campaigns quickly. Use ROI when you decide whether to keep investing in a channel. You can test your own numbers with our ROAS calculator and ROI calculator.
