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Glossary

ROAS vs ROI

ROAS divides the revenue from ads by ad spend, while ROI divides the profit left after costs and ad spend by that spend, so only ROI counts margin.

By Berend Vrakking, founder of Product Metrics. Updated 7 October 2026.

Formula

ROAS = revenue from ads ÷ ad spend · ROI = (profit before ad spend − ad spend) ÷ ad spend

Profit before ad spend is revenue minus all variable costs: product cost, shipping, fees and returns. Divided by ad spend, that profit is POAS, so ROI = POAS − 1 = ROAS × contribution margin − 1. Break-even ROAS is 1 ÷ contribution margin; break-even POAS is 1 and break-even ROI is 0%.

Example

One product, the same spend, three metrics
StepValue
Ad spend€1,000.00
Revenue from ads€3,000.00
Contribution margin30%
Profit before ad spend (€3,000.00 × 30%)€900.00
ROAS (€3,000.00 ÷ €1,000.00)3
POAS (€900.00 ÷ €1,000.00)0.9
ROI ((€900.00 − €1,000.00) ÷ €1,000.00)−10%
Break-even ROAS (1 ÷ 0.30)3.33

A ROAS of 3 looks healthy, but the product needs 3.33 to break even: the ads lost €100.00, a POAS of 0.9 and an ROI of −10%. Illustrative data.

For one product, and for an account

Contribution margin is the whole gap between the two. At the same ROAS of 3, a product with a 30% margin has an ROI of −10% and a product with a 50% margin an ROI of 50%. On an account ROAS report they look identical.

Use ROAS where Google Ads expects it: a target ROAS is the conversion value you want per unit of ad spend, so with revenue as conversion value the setting works in ROAS. Use ROI or POAS for business decisions, such as whether to increase or lower a product’s priority. Product Metrics starts in ROAS and moves to POAS as soon as margins are connected.

Common mistake

Reading any ROAS above 1 as profit. ROAS only covers the ad spend; the product cost, shipping, fees and returns still come out of the revenue.

Questions

Is ROAS the same as ROI?

No. ROAS divides revenue by ad spend and leaves out what the products cost. ROI divides the profit after all costs, including the ad spend, by that spend. They only move together when margins stay the same.

Can a ROAS above 1 still lose money?

Yes. A product breaks even at a ROAS of 1 ÷ its contribution margin. With a 30% margin that is 3.33, so a ROAS of 3 loses €0.10 for every €1.00 of ad spend: an ROI of −10%. Illustrative data.

How do you convert ROAS to ROI?

Multiply ROAS by the contribution margin and subtract 1. A ROAS of 4 on a 40% margin gives 4 × 0.40 − 1 = 0.6, an ROI of 60%. The middle step, 1.6, is the POAS.

Sources

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