What is ROAS?
ROAS (Return on Ad Spend) shows the ratio of revenue attributed to ads to the cost of those ads.
In the simplest terms: if you spend 2,000 PLN on advertising and the campaign generates 10,000 PLN in attributed revenue, your ROAS is: 10,000 PLN / 2,000 PLN = 5
This can also be expressed as 500%. In this scenario, every zloty spent on ads returned 5 PLN in revenue.
And that is precisely where it is easy to jump to the wrong conclusion. That 5 PLN is not profit.
Why high ROAS doesn't necessarily mean an ad is profitable
ROAS compares conversion value directly against ad spend. If you pass total sales revenue as your conversion value, the metric will not automatically deduct product costs, packaging, payment processing, order handling, or returns.
That is why two campaigns with an identical ROAS can have an entirely different impact on your bottom line.
Imagine two shops. Both spend 2,000 PLN on advertising and generate 10,000 PLN in revenue from it. Both show a ROAS of 5.
In the first shop, after deducting product costs and other variable expenses, 4,000 PLN remains. Deducting the ad spend leaves 2,000 PLN to cover fixed costs and contribute to company profit.
In the second shop, after deducting those same variable expenses, only 1,500 PLN remains. Deducting the 2,000 PLN spent on advertising leaves a net result of minus 500 PLN.
The ROAS is 5 in both cases. Yet the unit economics are completely different.
What is a good ROAS?
There is no single ROAS figure that is universally good for every online shop.
A ROAS of 3 might be perfectly viable for high-margin products, while for low-margin goods, even a ROAS of 6 might fail to deliver the desired return.
A lot depends on how much remains from a sale once product costs and fulfilment expenses are deducted. The lower that remaining amount, the higher the ROAS you need simply to cover your ad costs.
Therefore, a good ROAS for any specific shop can only be established after weighing campaign performance against margins and selling costs.
How to calculate your minimum break-even ROAS
You can start with a simple approximation.
Suppose that after subtracting product costs and other variable expenses, you are left with 40% of revenue. For every 100 PLN in sales, you have 40 PLN available to cover advertising and general operating overheads.
Your benchmark break-even ROAS is then: 1 / 0.40 = 2.5
If only 20% of revenue remains: 1 / 0.20 = 5
This illustrates why evaluating ROAS without knowing your margins and actual costs is meaningless.
With 40% remaining before ad spend, a ROAS of 3 clears this baseline break-even threshold. At 20%, that exact same ROAS lands you in the red.
This calculation is still a simplification. Among other things, it does not factor in fixed overheads, changes in basket composition, or all overhead costs associated with running a shop. Still, it provides a far better starting point than applying a single blanket ROAS target to all campaigns.
What to include when evaluating ad profitability
To accurately assess campaign performance, you should cross-reference ad metrics with at least:
- sales revenue,
- cost of goods sold (COGS),
- remaining variable fulfilment costs,
- ad spend,
- returns and cancelled orders.
Depending on your business model, payment gateway fees, shipping costs absorbed by the merchant, packaging supplies, and other operational expenses directly tied to order fulfilment can also play a major role.
It is equally critical to maintain a consistent baseline for calculations. For example, you should never compare gross revenue against net costs to draw conclusions about profitability.
Check what Google Ads counts as conversion value
Before analysing ROAS, double-check what is actually being fed into its numerator.
Google Ads allows you to pass various conversion values. In an e-commerce context, this is typically the transaction total, but the exact figure depends on your specific tracking configuration and setup.
Make sure to verify whether your reported values include shipping fees, taxes, cancelled orders, and subsequent returns.
For more details on conversion values, consult the Google Ads documentation.
What about returning customers?
In e-commerce, the initial purchase does not always reflect the full lifetime value of an acquired customer.
If a predictable share of buyers regularly return to your shop, you might comfortably accept a higher acquisition cost on their first order. That said, never assume that every new customer will return.
This decision is best grounded in historical data. Look at how many customers actually make repeat purchases, the average repeat interval, and the typical value of subsequent orders.
This separates the tangible value of returning customers from the wishful assumption that future sales will automatically cover today's advertising costs.
ROAS is also an attribution question
Keep in mind that revenue reported in ad managers is credited to campaigns according to a specific attribution model.
This does not automatically prove that none of those transactions would have happened without the ad. The buyer might already know the brand, arrived through another channel, or interacted with multiple touchpoints along their journey.
For this reason, when dealing with larger budgets, it pays to look beyond individual campaign returns and assess overall store sales and channel interplay as a whole.
What does a solid e-commerce report look like?
ROAS should be just one component of your reporting, not the final word.
A good report should quickly answer one key question: does the revenue generated at this level of ad spend actually make financial sense for the business?
Alongside ROAS, you should track total revenue, ad spend, variable costs, and returns. If your shop captures the necessary data, expand the analysis to specific product categories, as well as new versus returning customers.
This shifts the focus from merely tracking campaign performance to evaluating true commercial impact.
Never optimise ads in isolation from the shop
Ad platforms understand campaign delivery. Online shops understand order flows. Financial systems understand costs. Only by combining all three do you get the full picture.
So before scaling up the budget on a high-ROAS campaign, ask yourself the simpler question:
How much money does the business actually keep from the sales generated by these ads?
At Dock, we help businesses connect data across shops, ad campaigns, and external systems to build reporting matched to how their business truly runs. This ensures marketing decisions are guided not just by figures in an ad dashboard, but by real sales margins and operating costs.
