ROAS stands for return on ad spend. The metric is extremely important to businesses who use paid advertising since it can help them understand how much return they generate in comparison to how much they spend on ads.

The ROAS formula helps you determine if you made a profit after deducting your ad spend from the amount you earned. If you made any money on your ad, you’ll have a positive ROAS percentage, but that doesn’t necessarily mean that you made a profit from your ad campaign. For example, if you made a $500 sale on an ad, and you spent $750 on the ad, your ROAS would be 66%. Initially, you might be satisfied with that number, but in reality, you didn’t actually make a profit. In fact, you lost $250.