Money & metrics · also called return on ad spend
ROAS (return on ad spend)
ROAS is revenue divided by advertising spend, usually shown as a percentage or multiple; 100% (1.0x) means the ads exactly paid for themselves.
Return on ad spend is the simplest ratio in the business: for every dollar put into the traffic source, how many came back from the feed? A ROAS of 130% (or 1.3x) means $1.30 back per $1.00 spent.
It differs from ROI only in arithmetic. ROAS is revenue over spend; ROI is profit over spend. ROAS = ROI + 100%. Ad platforms speak ROAS because their automated bidding is built around it: Google's Target ROAS and Meta's ROAS goal both ask for a target ratio and then bid to reach it using the conversion values the advertiser reports.
For an arbitrageur the platform's ROAS column is only as good as the revenue sent back to it. If the tracker posts estimated revenue promptly through a Conversions API, the platform's figure will be close. If postbacks are late, de-duplicated badly or missing, the platform under-reports and bids too timidly. The reference figure is always the operator's own: finalised feed revenue over invoiced spend.
An example
Say you spend $1,000 and the feed finally pays $1,196. ROAS = 1,196 / 1,000 = 119.6% (1.196x). Profit is $196, so ROI is 19.6%.
Related terms
ROI (return on investment)
ROI is profit expressed as a percentage of what was spent: revenue minus cost, divided by cost.
Target ROAS (tROAS)
Target ROAS is an automated bid strategy that sets bids to reach a chosen ratio of conversion value to ad spend, such as $1.30 back for every $1 spent.
Value-based bidding
Value-based bidding is automated bidding that aims for the highest total conversion value, not the highest number of conversions, using values the advertiser reports.
Ad spend
Ad spend is the money paid to advertising platforms to buy traffic; in search arbitrage it is the main cost of the business.
Profit margin
Profit margin is profit as a percentage of revenue: the share of each dollar earned that is left after costs.