---
title: "Target ROAS: meaning and margin formula | Product Metrics"
description: "Target ROAS is the average conversion value per ad cost you ask Google Ads to aim for. Learn how contribution margin sets a revenue-based target."
canonical: "https://www.productmetrics.io/glossary/target-roas"
pageType: article
language: en
publisher: "Product Metrics"
author: "Berend Vrakking"
datePublished: 2026-10-15
dateModified: 2026-10-15
---

> Content index: https://www.productmetrics.io/llms.txt

# Target ROAS

Target ROAS is the average conversion value per unit of advertising cost that you ask Google Ads to aim for.

## Formula

`Revenue-based target ROAS = 1 ÷ (contribution margin rate − desired profit rate)`

Both rates are shares of net revenue. Desired profit means contribution after ads, before overheads. The denominator must be positive. Google Ads receives the ratio as a percentage: 5 becomes 500%.

## Example

Leaving room for profit:

| Input | Value |
| --- | --- |
| Contribution margin before ads | 30% |
| Desired profit after ads | 10% of revenue |
| Available ad spend on €100.00 revenue | €20.00 |
| Target ROAS (1 ÷ 0.20) | 500% |

The target leaves €10.00 after €70.00 of variable costs and €20.00 of advertising, before overheads. Illustrative data.

## Put it into practice

- [Calculate it: Break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator): Apply the definition to your products.
- [Read the guide: Target ROAS from margin](https://www.productmetrics.io/blog/target-roas-from-margin): Work through the concept in more detail.

## For one product, and for an account

A campaign target averages across products with different margins. Work out product thresholds before grouping them. A margin-derived target is an economic requirement, not proof that demand or campaign performance can achieve it.

## Common mistake

Treating the target as a guaranteed minimum for every sale. Google Ads aims for an average; individual conversions and products can fall above or below it.

## Questions

### Is target ROAS the same as break-even ROAS?

No. Break-even ROAS is the lowest return that covers your included costs and advertising, with no profit left. A target ROAS that leaves room for profit sits above it. In the example, a 30% margin and 10% desired profit give a target of 500%, against a break-even ROAS of 3.33.

### Does this formula apply to profit conversion values?

No. The formula assumes revenue is your conversion value. If you send profit as the conversion value, the target must be set on that profit value instead, and a revenue-based target would be wrong. Use this formula only when the conversion action reports revenue.

## Sources

- [Google Ads: about target ROAS bidding](https://support.google.com/google-ads/answer/6268637?hl=en)

## Keep reading

- [Break-even ROAS](https://www.productmetrics.io/glossary/break-even-roas): Start with the threshold before adding profit.
- [Conversion value](https://www.productmetrics.io/glossary/conversion-value): Understand the value your bidding strategy uses.

---

Written by Berend Vrakking, founder of Product Metrics. Last updated 2026-10-15.

HTML version: https://www.productmetrics.io/glossary/target-roas