ROAS: what it is, how to calculate it and what a good number looks like
ROAS means return on ad spend: how many pesos you sell for every peso you put into ads. If you invest $1 million and sell $8 million attributed to those ads, your ROAS is 8. It is the most important metric in e-commerce and also one of the most manipulated.
How to calculate it (properly)
The formula is simple: attributed revenue divided by spend. The trap is in "attributed". Meta and Google tend to claim sales the other platform also claimed, or sales that would have happened anyway. That is why we also calculate channel ROAS: the store's total sales divided by all ad spend. That number cannot be inflated.
What is a good ROAS?
- Under 3: review margin, creative and measurement. Something is failing.
- Between 4 and 8: healthy zone for most e-commerce in Colombia.
- Over 10: a finely tuned operation, with strong brand and repurchase working.
Across our clients the average is around 12x, and we have hit peaks of 28x in strong campaign months. That is not market average: it is what happens when ads, store and CRM work together.
ROAS does not live alone
A high ROAS with small sales can be worse business than a medium ROAS with big volume. And ROAS ignores your margin: selling a lot with negative margin is going broke fast with pretty metrics. That is why we always cross it with CPA, average order value and contribution margin.
Platform metrics tell you how the ad is doing. Channel ROAS tells you how the business is doing.
To take with you
Demand channel ROAS next to platform ROAS in your reports. If your agency only shows the second one, ask why. And if nobody has audited your measurement, start there: without clean data, any ROAS is fiction.
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