Stop 08 · Marketing Analytics & DataTopics · 10/11

ROAS & ROI Calculation

In short

ROAS says your ads made ₹4 for every ₹1. Sounds great, until you subtract product costs and find you barely broke even. Know both numbers.

Return on Ad Spend measures revenue generated per rupee spent on ads specifically; ROI is the broader profitability measure across the whole marketing investment — both essential for justifying budget.

The blob counts coins at a small table with colourful gift boxes and a lit diya.

Think of it like this

The Diwali crackers stall

Your cousin's Diwali stall sold ₹50,000 of crackers. 'Huge profit!' he says. Then you subtract the stock he bought, the stall rent and the helper's pay. What's left is the real story. ROAS is the sales; ROI is what's left.

Watch it happen

ROAS vs ROI

ROAS

Revenue from ads / ad spend
Shown inside ad platforms
Great for comparing campaigns

ROI

Profit / total investment
Includes product and other costs
Tells you if you made money

Use ROAS to tune ads day to day. Use ROI to decide whether the whole effort is worth it.

The big ideas

What you need to know

ROAS formula

ROAS = revenue from ads / ad spend. ₹40,000 / ₹10,000 = 4, often written as 4x or 400%.

ROI formula

ROI = (profit - investment) / investment x 100. It can be negative even when ROAS looks fine.

Break-even ROAS

1 / gross margin. With a 25% margin, you need 4x ROAS just to cover product costs from ads.

Attribution affects ROAS

Platforms credit themselves generously. Check ROAS against your own sales data too.

See it in code

Walk through the code

excel

1B1  Ad spend              100002B2  Revenue from ads      400003B3  Gross margin            25%4B4  ROAS             =B2/B1                 → 4.0x5B5  Gross profit     =B2*B3                 → ₹10,0006B6  ROI              =(B5-B1)/B1            → 0%7B7  Break-even ROAS  =1/B3                  → 4.0x

1/3₹4 of sales for every ₹1 of ads.

A 4x ROAS looks strong, but with a 25% margin it only breaks even. Always check margin before celebrating.

Save yourself the pain

Common mistakes

Oops

Treating any ROAS above 1 as profitable.

Do this instead

Work out break-even ROAS from your margin first. A 2x ROAS can still lose money.

Oops

Using platform ROAS as the final word.

Do this instead

Compare with actual orders in your store or GA4, since platforms often over-count.

Your mission

Find the break-even point

~15 min

Quick check

A product has a 50% gross margin. What's the break-even ROAS?

Go deeper

1Calculate ROAS for a hypothetical campaign given spend and attributed revenue.
2Learn the difference between ROAS (revenue-based) and true ROI (profit-based, after costs).
3Practice presenting a campaign's ROAS alongside its key assumptions, not as a bare number.