Short answer: A good ROAS is one that clears your break-even ROAS, which is 1 divided by your gross margin after variable costs. At a 50% margin, break-even is 2.0, so 3.0 is healthy. At a 25% margin, break-even is 4.0, so 3.0 loses money. Judge it by campaign type and new customers, and check it against MER.
Key takeaways
- There is no universal good ROAS. The number that matters is your own break-even ROAS: 1 divided by your margin after product cost, shipping, payment fees and returns.
- Your target ROAS sits above break-even by however much profit you want each sale to leave behind after ad spend.
- New-customer campaigns can run at a lower ROAS than campaigns reaching existing customers, as long as repeat purchases pay back the difference.
- Platform-reported ROAS usually overstates the real return, because of attribution windows, view-through credit and Google and Meta both claiming the same order.
- MER, also called blended ROAS, is total revenue divided by total marketing spend. It is the reality check on every platform number.
- Chasing the highest possible ROAS often means spending too little. The goal is the most profit, not the prettiest ratio.
ROAS (return on ad spend) is revenue attributed to ads divided by what you spent on those ads. Spend €1,000, get €3,000 in attributed sales, and your ROAS is 3.0, sometimes written as 300% or 3:1. It is the number most ad platforms put front and centre, and the one most store owners ask about first.
The problem is that ROAS measures revenue, not profit, and it uses the platform's own idea of which sales it caused. A ROAS of 4.0 can be a disaster for one business and wildly profitable for another. This guide shows the maths that turns ROAS into a decision: how to work out your break-even, how to set a target, how targets should differ by campaign, and how to check the platforms' numbers against your own.
How do you calculate break-even ROAS?
Break-even ROAS is 1 divided by your gross margin after variable costs, written as a decimal. If each €100 order leaves you €50 after all the costs that come with that order, your margin is 50% and your break-even ROAS is 1 divided by 0.5, which is 2.0.
At break-even, every euro of ad spend brings back exactly enough margin to pay for itself. Below that line, each sale the ads bring in costs you money. Above it, the ads contribute profit towards your fixed costs.
Which costs go into the margin
Use every cost that rises with each order, not just the product cost.
- Product cost: what you paid for the goods, including inbound freight and duties.
- Fulfilment and shipping: pick, pack, postage and packaging, minus whatever the customer pays for delivery.
- Payment fees: card and wallet fees, usually a few percent of the order.
- Returns and refunds: an allowance based on your actual return rate, including the cost of items you cannot resell.
- Discounts: if most ad-driven orders use a code, use the average discounted order value, not the full price.
Leave out fixed costs such as rent, salaries and software for now. They matter, and we come back to them in the MER section, but break-even ROAS answers a narrower question: does an ad-driven sale pay for its own ad spend?
Order and variable costs
Average order value €100. Product cost €35, fulfilment and shipping €8, payment fees €3, returns allowance €4. Total variable costs €50.
Margin after variable costs
€100 minus €50 leaves €50 per order, which is a 50% margin.
Break-even ROAS
1 divided by 0.5 equals 2.0. You can spend up to €50 in ads for each €100 order before the order loses money.
The same formula gives very different answers depending on margin. This is why copying someone else's "good ROAS" is risky.
| Margin after variable costs | Break-even ROAS | Most you can spend on ads per €100 of sales |
|---|---|---|
| 20% | 5.0 | €20 |
| 30% | 3.33 | €30 |
| 40% | 2.5 | €40 |
| 50% | 2.0 | €50 |
| 60% | 1.67 | €60 |
| 70% | 1.43 | €70 |
The common mistake here is treating break-even as a target. A campaign that runs exactly at break-even earns nothing towards your overheads. It is a floor, and it is the first number to agree with anyone who manages your ads.
What ROAS do you need to hit a profit goal?
Target ROAS is 1 divided by your margin minus the profit you want to keep, both as a share of revenue. With a 50% margin and a goal of 15% of revenue left over after ad spend, you can spend 35% of revenue on ads, so your target ROAS is 1 divided by 0.35, which is about 2.86.
The goal
Margin after variable costs is 50%. You want 15% of ad-driven revenue left as contribution after paying for the ads.
The calculation
50% minus 15% leaves 35% of revenue for ads. 1 divided by 0.35 gives a target ROAS of about 2.86.
The check
€10,000 of sales at that ROAS costs €3,500 in ads. Margin is €5,000, so €1,500 is left, which is 15% of revenue.
Two things to watch. First, the profit you set here is contribution, not net profit. It still has to cover rent, wages and everything else that does not change with each order. Second, the higher the profit share you demand, the faster the target ROAS climbs. With a 50% margin, asking for 25% profit pushes the target to 4.0, and asking for 40% pushes it to 10.0. Very few campaigns that reach new customers can sustain numbers like that, so a target set too high quietly shrinks your business.
What is a good ROAS for ecommerce, by channel and campaign type?
A good ecommerce ROAS depends on what the campaign is meant to do. Brand search and retargeting usually show high ROAS because they reach people who already know you. Prospecting on Meta or non-brand Google search usually shows lower ROAS because it has to find new buyers. Each needs its own target.
If you set one ROAS target for the whole account, budget drifts towards whatever shows the highest number, which is nearly always brand search and retargeting. Those campaigns mostly harvest demand that would have reached you anyway. The account average looks great while the number of new customers stays flat.
| Campaign type | What it mostly does | Typical ROAS pattern | How to set the target |
|---|---|---|---|
| Brand search | Catches people already searching your name | Often very high, many times break-even | Keep spend small and controlled. Do not use it to lift the account average. |
| Retargeting and existing customers | Reminds recent visitors and past buyers | Usually high | Hold to a high target, because much of this revenue would arrive anyway. |
| Shopping and non-brand search | Captures people searching for the product type | Usually moderate, somewhere above break-even when it works | Profit target, adjusted for the share of new customers. |
| Prospecting on Meta and other social | Creates demand among people who have not heard of you | Often the lowest on platform numbers | Judge on new-customer ROAS and payback, not first-click revenue alone. |
Rules of thumb, with the right caveats
You will see figures like "4.0 is a good ROAS" quoted everywhere. As a rough rule of thumb, many ecommerce stores with margins around 40% to 60% find that a blended platform ROAS somewhere around 3 to 4 leaves real profit. But that rule falls apart for low-margin categories such as electronics or groceries, where break-even alone might be 4 or 5, and for high-margin products such as skincare or digital goods, where a ROAS of 2 can be very profitable. Always start from your break-even, then decide how far above it each campaign type should sit.
The channel matters as well. Google search tends to capture intent that already exists, so its ROAS often looks stronger than Meta's. That does not make Google better. Meta often creates the interest that later shows up as a Google search. We cover the economics of each channel in more depth in are Google Ads worth it and are Facebook ads worth it.
If brand search sits inside the same campaign as non-brand search or Shopping, its high ROAS hides how the rest performs. Separate them first, then read the numbers.
Why is new-customer ROAS different from returning-customer ROAS?
A new customer's first order often does not cover the cost of winning them, but their later orders do. A returning customer was already yours, so ads aimed at them should clear a much higher bar. Mixing both into one ROAS hides whether you are growing or just reselling to the same people.
New-customer ROAS is first-order revenue from new customers divided by ad spend. Shopify and most ecommerce platforms can split revenue into first-time and returning buyers, and Google Ads can report new-customer conversions if you feed it your customer list. When the two are separated, the picture usually changes a lot.
How repeat purchases change what you can pay
First order
Order value €100, margin 50%. The campaign brings new customers at a ROAS of 1.6, so each one costs €62.50 in ads. Margin on the first order is €50, so you are €12.50 down.
Twelve months later
Suppose these customers place 2.2 orders on average in their first year, at the same value and margin. That is €110 of margin per customer.
The real result
€110 margin minus €62.50 ad cost leaves €47.50 per customer over the year, before the cost of the emails and offers that drive repeat orders.
On platform ROAS alone, this campaign looks like it should be switched off. On a twelve-month view it is one of the better uses of budget. The catch is that you need real repeat data, from your own store, for customers acquired through paid channels. Customers won through heavy discounts often repeat less, so do not assume your best customers' behaviour applies to everyone.
Two practical guardrails keep this honest:
- Set a payback window. Decide how long you can wait to recover the ad cost, for example within 90 days or within twelve months. Cash flow, not theory, sets that limit.
- Use cohort data, not hope. Look at customers acquired six or twelve months ago and count what they actually spent since. If the data is thin, assume less repeat than you hope for.
Returning-customer campaigns need the opposite treatment. If a retargeting campaign shows a ROAS of 8.0 but most buyers were past customers who also received your emails, a large share of that revenue would have come in without the ad. Give those campaigns a much higher target, and cap their budget.
Performance marketing services that start from your margin
We work out your break-even and target ROAS from your real costs, split new and returning customers, and set targets per campaign type. If the numbers say a channel will not pay back, we tell you before you spend.
See our performance marketing servicesHow much does platform-reported ROAS overstate the real return?
Usually by enough to change the decision. Each platform credits itself with any sale it can link to an ad within its attribution window, including sales after a view with no click, and Google and Meta both claim orders they shared. Added together, the platforms often claim more revenue than the ads could possibly have influenced.
The mechanisms are simple. A seven-day click window credits a sale to an ad clicked six days earlier, even if the buyer came back through an email. A one-day view window credits a sale to anyone who scrolled past an ad. And when one buyer sees a Meta ad, then clicks a Google Shopping ad and buys, both platforms report the full order.
What the platforms claim
Meta reports €30,000 on €10,000 spend, a ROAS of 3.0. Google reports €25,000 on €6,000 spend, about 4.17. Together, €55,000 on €16,000, a combined ROAS of about 3.44.
What the shop recorded
Total revenue for the month was €60,000. Of that, €28,000 came from orders with no paid touch at all: email, organic search, direct visits by regulars.
The ceiling
At most €32,000 could have involved ads. €32,000 divided by €16,000 is a ROAS of 2.0 at best, against a break-even of 2.0. The platforms claim about 1.7 times what is possible.
The platforms' combined 3.44 suggests a comfortable profit. The ceiling says the ads are, at best, paying for themselves, and some of that €32,000 would have happened without them. That is a very different conversation about budget.
Turning the gap into a correction factor
Once you know the ratio between what platforms claim and what your own data supports, you can apply it to their reported ROAS week to week. In the example above, platform ROAS needs to be divided by about 1.7 to get a realistic figure. So if your real break-even is 2.0, platform-reported ROAS needs to be around 3.4 just to be at break-even. Recheck it whenever attribution settings, campaign mix or tracking change.
Clean tracking matters here. If your conversion setup double counts purchases or misses consent-declined orders, the factor drifts. This is the kind of groundwork our marketing analytics services cover before anyone sets a ROAS target.
MER vs ROAS: what is blended ROAS and why is it the reality check?
MER (marketing efficiency ratio) is total revenue divided by total marketing spend, across every channel. Blended ROAS is the same idea, usually with ad spend only on the bottom line. Neither depends on platform attribution, so they cannot be inflated by double counting, which makes them the check on every ROAS figure.
Use platform ROAS to steer budget between campaigns, and MER to judge whether the total effort pays for the business.
How to work out the MER you need
Unlike break-even ROAS, a useful MER target includes your fixed costs. The question becomes: at this level of revenue, how much can we spend on marketing and still not lose money overall?
The month
Revenue €60,000, margin after variable costs 50%, so contribution before marketing is €30,000. Fixed costs are €12,000.
Break-even MER
Contribution minus fixed costs leaves €18,000 for marketing. €60,000 divided by €18,000 is an MER of about 3.33.
Actual MER
Total marketing spend was €16,000, so MER was 3.75. Profit is €30,000 minus €16,000 minus €12,000, which is €2,000.
Notice what this shows. The ad-only ceiling earlier put real ad ROAS near 2.0, roughly break-even for the ads alone. Yet the business is still profitable at an MER of 3.75, because email, organic search and repeat buyers bring in revenue at almost no marginal cost.
Can a high ROAS be bad for your business?
Yes. ROAS usually falls as you spend more, because each extra euro reaches people less ready to buy. So the highest ROAS often sits at a budget that is too small. The right question is whether the last euro you added still earned more margin than it cost.
That last-euro return is called marginal ROAS: the extra revenue from a budget increase divided by the extra spend. Average ROAS can look healthy long after marginal ROAS has dropped below break-even, and it can look disappointing while marginal ROAS is still well above it.
| Monthly ad spend | Average ROAS | Revenue | Margin at 50% | Contribution after ads | Marginal ROAS of the step |
|---|---|---|---|---|---|
| €5,000 | 4.0 | €20,000 | €10,000 | €5,000 | n/a |
| €8,000 | 3.4 | €27,200 | €13,600 | €5,600 | 2.4 |
| €10,000 | 3.0 | €30,000 | €15,000 | €5,000 | 1.4 |
| €15,000 | 2.6 | €39,000 | €19,500 | €4,500 | 1.8 |
In this illustrative example, the €5,000 budget has the best ROAS, but €8,000 makes €600 more profit, because the extra €3,000 earned a marginal ROAS of 2.4, above the 2.0 break-even. Beyond €8,000 the extra spend earns less than it costs. The best ROAS and the best profit sit at different budgets.
Profit is only half of it. The €8,000 budget also brings in more customers, who keep buying in later months. A business that holds every campaign to its highest possible ROAS tends to shrink slowly, with fewer new customers each month.
How to spot a ROAS target that is starving growth
- Campaigns are regularly "limited by budget" or the bidding strategy is spending well under its daily budget.
- Platform ROAS is rising but new customers per month are flat or falling.
- Most spend sits in brand search and retargeting.
The fix is to test budget steps on purpose. Raise spend on a campaign by a set amount for two to four weeks, then compare the extra revenue in your own store against the extra spend. If marginal ROAS is above break-even, keep the step. If not, step back. In our Google Ads management services and Meta ads services, this kind of controlled budget test is how we decide where the next euro goes.
Work out your break-even ROAS, target ROAS and MER from last month's numbers
- From your store, take last month's revenue and number of orders. Divide revenue by orders to get average order value.
- Add up the variable cost of an average order: product cost, fulfilment and shipping, payment fees and a returns allowance.
- Subtract that from the average order value and divide by the average order value. That is your margin. Break-even ROAS is 1 divided by that margin.
- Pick the share of revenue you want left after ads, for example 10% to 15%. Target ROAS is 1 divided by your margin minus that share.
- Add up all marketing spend for the month across every platform, plus email and influencer costs. MER is total revenue divided by that total.
- Compare your platforms' combined reported ROAS with your MER and your break-even. Write down the gap.
Example: €100 orders with €50 of variable costs give a 50% margin, a break-even ROAS of 2.0 and, for 15% profit, a target ROAS of about 2.86.
Frequently asked questions
It depends entirely on your margin. With a 60% margin after variable costs, a ROAS of 2 makes a profit on every ad-driven sale. With a 50% margin it only breaks even, and with a 30% margin it loses money. Calculate your break-even first and the answer becomes obvious.
No. ROAS compares revenue with ad spend, while ROI compares profit with total cost. A ROAS of 3.0 at a 30% margin is a negative return on investment once product costs are counted. Use ROAS to manage campaigns, and profit or ROI to judge the business.
Google Ads expects target ROAS as a percentage, so a target of 3.0 is entered as 300%. Start close to what the campaign has actually achieved over the last few weeks, then adjust in small steps. Setting it far above recent results usually makes the campaign stop spending rather than become more efficient.
Platform ROAS normally uses media spend only, which is fine for comparing campaigns. For judging whether marketing pays off overall, include fees, tools and creative costs in your MER. We suggest calculating MER both ways, so you can see the effect of the fees clearly.
Extra budget reaches people who are less ready to buy, and bidding algorithms often need a week or two to settle after a big change. Some drop is normal and can still be profitable if the marginal ROAS stays above break-even. Raise budgets in steps and measure the extra revenue in your own store, not just the platform average.
Review them whenever your margin changes, for example after a price rise, a supplier change or a big sale period. Otherwise, a quarterly check against MER and new-customer numbers is usually enough. Changing targets every few days mostly confuses the bidding algorithms.
What to do next
A good ROAS is not a number you look up. It is one you calculate from your own margin, then check against what your store actually recorded. Once you have break-even, target and MER on one page, most budget decisions become much simpler.
- Calculate your break-even ROAS using the steps in the box above, with real costs from last month.
- Split brand search, retargeting and prospecting, and give each its own target, using new-customer ROAS for prospecting.
- Put platform-reported ROAS next to your MER every month, and use the gap as your correction factor.
If you would like a second pair of eyes on your numbers, request a free written audit and we will send you our findings within 48 hours, including where your current ROAS targets sit against your break-even.