What is ROAS (Return on ad spend)?
ROAS stands for Return on ad spend and is a metric that shows how effectively your ads generate revenue relative to the money you spend on them. You can think of ROAS as a direct answer to the question: “How many kroner do I get back for every krone I spend on advertising?” When you measure ROAS, you get a number that lets you compare campaigns across channels and formats — whether you work with Google Ads, social media or programmatic advertising.
A high ROAS means your campaigns generate more revenue per krone spent on ads. But it's not just a number that shows profit. It's a strategic tool, because it reveals which ads create real business value and which simply cost money without giving anything back. When you combine ROAS with metrics such as CPC (Cost Per Click) or CPA (Cost Per Acquisition), you get a clear picture of how your overall marketing is performing.
How do you use ROAS?
You use ROAS to measure how effective your ad budgets are and to decide where to invest the most. The basic formula is simple: you divide your ad revenue by your ad spend. The result shows how many times over you've earned back the money. For example, a ROAS of 4:1 means you get four kroner in revenue for every krone you spend on ads.
The formula looks like this:
When you run ads on search engines or social media, for example through targeting in Google Ads or paid social, ROAS is a key metric. It helps you understand whether your creative work, your ad format and your message actually convert into sales or leads. You can use ROAS as a management tool to adjust your campaigns continuously, so you maximise the return on every krone you spend on ads.
Why is ROAS important?
ROAS is important because it links your ad spend directly to your business's earnings. That gives you a clear indicator of whether your advertising is profitable. Without a solid understanding of ROAS, you risk spending budget on campaigns that drive traffic but don't contribute to revenue. In other words, ROAS helps you prioritise the channels and messages that create real value.
If you work with performance marketing, ROAS acts as a benchmark for whether campaigns are performing above or below expectations. It also becomes central to strategic planning, because ROAS data lets you adjust budgets, choose target audiences and optimise bidding strategies. In practice, this means both creative decisions and the technical setup of campaigns are informed by data — not gut feeling.
What types and variants are there?
There are different ways to use and interpret ROAS, depending on your type of business and your margins. You can calculate your break-even ROAS, which shows the point where your ad revenue covers your costs without making a profit. This helps you know where your limit is — in other words, when a campaign starts eating into your profit.
Example of calculating break-even ROAS:
If your average profit margin is 40%, for example, you need a ROAS of 250% to cover your costs. That's why it's crucial to know your margins before you judge whether a ROAS value is “good”. In some industries, the average is around 400%, while others — particularly those with high operating costs — need a much higher level to be profitable.
How do you work with ROAS in practice?
In practice, working with ROAS is about collecting and analysing data from your ad platforms. That might be Google Ads, where you can use the Target ROAS bidding strategy to automatically optimise campaigns towards a desired rate of return. It might also be social media, where you manually evaluate ad formats and target audiences to improve ROAS over time.
It's a good idea to combine ROAS with other KPIs such as CPM, CPC and conversion rate, because each of them tells you something about a different stage of the customer journey. That way, you don't just get insight into how much you earn from ads, but also why the campaigns perform the way they do. You can then use that insight to optimise your ad setup, your landing pages and the creative side of your communication.
If you also work with SEO or content marketing, ROAS can help you see the direct connection between paid and organic performance. For example, if you have a high ROAS on a product campaign, you can use that insight to create more targeted organic content around the same products and so create a synergy between the channels.
What should you be aware of?
When you analyse ROAS, you need to be aware that the number only shows the return on your ads — not the full financial picture. You should therefore include other costs such as production costs, shipping and time spent when you assess whether a campaign is genuinely profitable. ROAS can easily look high if you only look at ad costs in isolation, but lower when you take the whole value chain into account.
It's also important to compare ROAS across periods and campaigns in a consistent way. Seasonal fluctuations, campaign types and pricing strategies can affect the numbers significantly. By following the development over time, rather than just looking at one-off results, you get a more accurate picture of your marketing effectiveness. Then you can use your data as real decision support when you need to choose between scaling up, adjusting or changing direction in your digital marketing.
