What is Return on Ad Spend (ROAS)?
Nexa Consultancy | Startup & Finance Glossary
Return on Ad Spend (ROAS) is a marketing metric that measures the amount of revenue generated for every rupee spent on advertising. It is a crucial indicator of the effectiveness and profitability of a company's advertising campaigns.
For Startups: For D2C and e-commerce startups that rely heavily on paid advertising (e.g., Google Ads, Facebook Ads), ROAS is a primary KPI. It helps in making real-time decisions about which campaigns to scale and which to cut. A high ROAS indicates an efficient marketing engine. It is different from ROI (Return on Investment) as it specifically measures the return from advertising, not overall investment.
Calculation: ROAS = (Revenue from Ad Campaign / Cost of Ad Campaign).
Example: A startup spends ₹1 Lakh on a Google Ads campaign, which generates ₹5 Lakhs in direct sales. The ROAS for this campaign is 5x.