What is ROAS (return on ad spend)?

Short answer. ROAS, return on ad spend, is the revenue attributed to your ads divided by what you spent on them. $4 of revenue per $1 of spend is a ROAS of 4:1 (400%); whether that is profitable depends on your margin and on how much of that revenue the ads actually caused.

Definition

AppsFlyer defines ROAS as a metric "measuring how much revenue was earned in comparison to how much budget was spent," and notes it "is typically expressed as a ratio and the higher the ratio, the better the campaign performed." It is the most common efficiency metric for both app advertisers (revenue from in-app purchases, ads or subscriptions) and consumer brands (revenue from orders).

Formula

ROAS = revenue from ad campaign / cost of ad campaign

It is usually reported over a window: day-7 ROAS counts revenue from users acquired in a period up to seven days after install or click. For apps, that window matters because revenue arrives over the user's lifetime (LTV).

Break-even ROAS. AppsFlyer gives the break-even point as "Break-even ROAS = 1 / average profit margin %". A product with a 40% margin breaks even at a ROAS of 250%.

Worked example (illustration)

These are made-up round numbers. A brand spends $5,000 and the attributed revenue is $15,000. ROAS = 3:1, or 300%. Its average margin is 40%, so break-even ROAS is 1 / 0.40 = 250%. The campaign clears break-even, on the platform's attribution. If a holdout later showed only half that revenue was caused by the ads, true ROAS would be 150% and the campaign would be losing money.

What a good or bad reading tells you

Above break-even, the attributed revenue covers the ad cost at your margin. Below it, you are paying for revenue. AppsFlyer lists three limits worth keeping in mind: ROAS is "focused on the short term," it does not show the bigger picture because "advertising is just one part of the marketing mix," and "it doesn't show volume," so a tiny, cheap campaign can post a high ROAS. AppsFlyer also notes that post-iOS 14 privacy changes have made the metric harder to measure, with data "more fragmented across networks."

We give no benchmark ROAS. A good ROAS is the one above your own break-even, measured on your own revenue.

How it is used in app, game and brand advertising

Game and app teams typically set ROAS targets by day (D7, D30). AppsFlyer notes that "even a partial ROAS can be really valuable, especially if predictive analytics are involved." Consumer brands usually read ROAS on purchases. In both cases the platform's ROAS is a steering number; the business number comes from your own data.

Common mistakes

1. Treating platform-reported ROAS as proof the spend is profitable. Every platform counts some customers who would have bought anyway.
2. Ignoring margin. A 3:1 ROAS on a 20% margin product loses money.
3. Comparing ROAS from different attribution windows.
4. Scaling a small, high-ROAS campaign and expecting the ratio to hold.

Flixr's view

Our view, from our incrementality guide: platform ROAS is for running the campaign, not for judging the channel, because "both platforms' self-reported numbers include customers who would have bought anyway." We read creative on purchases in the client's own data, which is why we wrote measure creative on purchases, not on the ad. To test whether the ROAS is real, see incrementality.