Published: 2026-02-20 · Paid Media · Ricky Bandelin
Return on Ad Spend (ROAS) is one of the most important metrics in digital advertising, but a "good" ROAS varies significantly by industry, business model, and profit margin. A 3:1 ROAS might be excellent for a high-margin software company and unsustainable for a thin-margin e-commerce retailer.
This article breaks down ROAS benchmarks across major industries in 2025 and explains how to determine what ROAS target makes sense for your specific business.
What Is ROAS and How Is It Calculated?
Return on Ad Spend (ROAS) is calculated by dividing total revenue from ads by total ad spend. If you spend $10,000 on advertising and generate $40,000 in revenue, your ROAS is 4:1 or 4x.
ROAS is a gross revenue metric — it does not account for cost of goods, fulfillment, or platform fees. This is an important distinction from Return on Investment (ROI), which measures profitability after all costs. A 4:1 ROAS might be highly profitable for one business and a money-loser for another, depending on their cost structure.
Your Break-Even ROAS
Before benchmarking against your industry, calculate your break-even ROAS — the point at which your ad spend is covered by gross profit. The formula is: Break-even ROAS = 1 / Gross Margin.
A business with a 30% gross margin needs a minimum ROAS of 3.33:1 to cover the cost of goods sold. Any ROAS below that means every sale loses money at the gross profit level, before operating expenses. Your target ROAS should be significantly above your break-even threshold to account for fulfillment, customer service, and other variable costs.