Paid ads

ROAS vs ROI: which number to use in paid ads

ROAS is revenue attributed to ads divided by media cost. If you spent $1,000 and attributed $4,000, ROAS is 4. That is the number most media buyers watch daily.

ROI is (return − cost) / cost, and the cost should include more than media when you are deciding if the company made money: tools, creative, agency fees, offers. A 4× ROAS can still be a bad ROI if the product margin is thin and CAC is ignored.

Use ROAS to decide whether to scale a campaign this week. Use ROI and CAC when you decide whether the channel is worth the team. Do not mix them in one sentence in a board slide.

If you only have spend and conversions, start with CPA. If you have spend and revenue, use ROAS. If you have new customers and total sales-and-marketing spend, use CAC.