A good return on ad spend is one that produces acceptable profit after product cost, delivery, discounts, payment fees, sales effort, returns, and other operating expenses. ROAS is calculated by dividing revenue attributed to ads by ad spend. A 4 times ROAS means the campaign generated \u20b94 in revenue for every \u20b91 spent on advertising, but it does not automatically mean the campaign was profitable.<\/p>\n\n\n\n
The required ROAS changes with the business model. If gross margin is 40 percent, the advertising only break even point is roughly 2.5 times before other expenses are considered. A lower ROAS may still be acceptable for a subscription business with strong repeat purchases, while a high ROAS may be inadequate for a low margin product with high return rates. Lead generation businesses should also review cost per qualified lead and customer acquisition cost because immediate revenue may not be available.<\/p>\n\n\n\n