Advertising · ROAS and ACOS
Measure the return.
Respect the margin.
Translate attributed revenue and ad spend into ROAS and ACOS, then compare performance with your margin-based break-even point.
ROASACOSBreak-even
Return on ad spend
4.00×ACOS25.0%
Profit after ads$1,500
Break-even ROAS2.50×
Break-even ACOS40.0%
Gross margin must already account for product cost and variable selling costs. Attribution quality, returns, overhead, and customer lifetime value are not modeled.Relationship
ROAS and ACOS are reciprocals expressed differently.
$10,000 in attributed revenue from $2,500 in ads is 4.0× ROAS and 25% ACOS. With 40% pre-ad gross margin, break-even is 2.5× ROAS or 40% ACOS. Better attribution and repeat-customer value may justify different targets.