ROAS Calculator – calculate ROAS for SEA - Google Ads in seconds

ROAS (return on ad spend) shows how much net revenue one euro of advertising generates. The formula is ROAS = net revenue ÷ ad spend. A ROAS of 5 means €1 of advertising produced €5 of revenue.

ROAS serves three main purposes:

• Comparing channels:

  • Google Ads, Meta Ads, Microsoft Ads and comparison shopping services can be measured on a common basis.

• Steering campaigns:

  • Bid strategies such as "Target ROAS" in Google Ads optimize directly for this metric.

• Planning budgets:

  • Budget and target ROAS determine the revenue a campaign has to deliver.

Multiply ROAS by 100. A ROAS of 6.67 equals 667 %, a ROAS of 4 equals 400 %.

This matters most in Google Ads, where target ROAS is entered as a percentage. To reach a ROAS of 5, you enter 500 %. A value below 100 % means advertising generates less revenue than it costs.

Any ROAS above your break-even ROAS is good – and that threshold depends entirely on your margin. The formula is break-even ROAS = 1 ÷ contribution margin before advertising costs. Industry averages therefore help very little.

How margin shifts the threshold:

• 20 % margin:

  • Break-even ROAS 5.0, equal to a CoS of 20 %

• 25 % margin:

  • Break-even ROAS 4.0, equal to a CoS of 25 %

• 40 % margin:

  • Break-even ROAS 2.5, equal to a CoS of 40 %

• 50 % margin:

  • Break-even ROAS 2.0, equal to a CoS of 50 %

At break-even, advertising only covers variable costs. To cover fixed costs and earn a profit, a campaign needs a ROAS well above it.

Always use net revenue excluding VAT. Only net revenue can be compared with your margin and your costs.

How much VAT distorts ROAS:

• Germany, 19 %:

  • A gross ROAS of 5.95 is only a net ROAS of 5.0.

• Austria, 20 %:

  • A gross ROAS of 6.0 is only a net ROAS of 5.0.

Check whether your conversion tracking passes gross or net values to Google Ads. In many stores this setting was never consciously chosen.

ROAS measures revenue per euro of advertising, ROI and POAS measure profit. A high ROAS therefore does not mean a campaign makes money.

The three metrics at a glance:

• ROAS (return on ad spend):

  • Net revenue ÷ ad spend. Quickly available and ideal for steering campaigns day to day.

• ROI (return on investment):

  • (Profit − investment) ÷ investment. Accounts for cost of goods, shipping, fees and returns.

• POAS (profit on ad spend):

  • Contribution margin ÷ ad spend. Steerable like ROAS, but based on profit. Break-even is always 1.0.

Google Ads attributes conversions by its own rules, while your store counts actual orders. Small differences are therefore normal, large ones point to gaps in tracking.

The most common causes:

• Gross instead of net values:

  • Tracking passes revenue including VAT or shipping costs.

• Returns and cancellations:

  • Google Ads does not learn when orders are returned.

• Attribution:

  • Google credits a purchase to an ad even when other channels were involved.

• Tracking gaps:

  • Cookie banners, ad blockers and browser restrictions prevent purchases from being measured. Server-side tracking closes a large share of these gaps.

With a ROAS below 1, advertising cost more than it brought in as revenue. Example: €1,000 of ad spend and €800 of revenue give a ROAS of 0.8.

Losses start much earlier, however. At a 30 % margin, a campaign needs a ROAS of 3.33 just to cover its advertising costs. A ROAS of 2 is already loss-making there, even though it looks positive at first glance.

Advertising below break-even on purpose can make sense for acquiring new customers – if repeat purchases offset the first-order loss through customer lifetime value.

Derive your target ROAS from your margin and profit goal, not from industry benchmarks.

In three steps:

• Determine break-even:

  • 1 ÷ contribution margin before advertising costs. At a 40 % margin that is 2.5.

• Add your profit goal:

  • If 10 % of revenue should remain after advertising, calculate 1 ÷ (40 % − 10 %) = 3.33.

• Enter it as a percentage:

  • In Google Ads this equals a target ROAS of 333 %. If your tracking passes gross values, also multiply by your VAT factor (1.19 in Germany).

Support with implementation is available from our Google Ads experts for Shopware and Shopify.