A good ROAS is any ROAS above your break-even ROAS, and a great ROAS is one that leaves the profit you planned for after overheads. The often-quoted "4:1 is good" rule only holds for businesses with roughly 35 to 45% gross margins. A software company at 90% margin is profitable at 1.2x, while a reseller at 20% margin loses money below 5x.
Step 1: find your break-even ROAS
Gross margin here means the share of revenue left after the direct cost of each sale: product or COGS, packaging, shipping you pay, payment fees and expected returns. Not after rent or salaries - those come later.
| Gross margin | Break-even ROAS | In plain words |
|---|---|---|
| 20% | 5.0x | Every $1 of ads must bring $5 of sales just to cover cost |
| 30% | 3.3x | The common "3x is good" campaign is losing money |
| 40% | 2.5x | |
| 50% | 2.0x | |
| 60% | 1.67x | |
| 75% | 1.33x | |
| 90% | 1.11x | Software and digital products |
Run your own numbers in the ROAS calculator - it shows break-even ROAS and profit after ads from three inputs.
Step 2: set a target ROAS above break-even
Break-even covers product costs and ad spend, but nothing else. To pay for overheads and keep some profit, aim higher:
Example: a skincare brand with a 65% gross margin wants 20% of revenue left after ads. Target ROAS = 1 / (0.65 - 0.20) = 2.2x. A 2.2x campaign is a "good" ROAS for that brand, even though it looks weak next to the 4x rule of thumb.
Typical ROAS by channel and campaign type
Platform-reported ROAS varies hugely by campaign type, so compare within a type rather than across them. As a rough orientation, not a benchmark to aim for:
| Campaign type | What usually happens to ROAS |
|---|---|
| Brand search | Very high (often 10x+), because people already looking for you |
| Retargeting | High, but much of it would have happened anyway |
| Non-brand search | Moderate; depends heavily on keyword intent |
| Prospecting social (Meta, TikTok) | Lowest first-order ROAS; this is where new customers come from |
| Shopping / Performance Max | Mixed; can blend brand and retargeting traffic into the number |
A business that only funds high-ROAS campaigns usually stops growing, because brand search and retargeting mostly harvest demand created elsewhere. That is why many teams track blended ROAS (MER) - total revenue divided by total ad spend - alongside platform ROAS.
When a low ROAS is fine
- Strong repeat purchases. If customers buy three times a year, a first-order ROAS below break-even can still pay back. Judge it with the LTV calculator instead.
- Subscriptions. The first payment rarely covers acquisition. What matters is LTV:CAC and payback time.
- Launch and testing. New campaigns need data before the algorithm settles. Judge after a meaningful number of conversions, not the first few days.
When a high ROAS is a warning sign
- It comes almost entirely from brand search or retargeting.
- Spend is tiny - many campaigns hit high ROAS at $20 a day and collapse at $200.
- Attribution overlaps: if Meta, Google and email all claim the same order, every channel looks great while total revenue is flat.
How to raise ROAS without touching the ads
- Increase average order value with bundles and free-shipping thresholds.
- Improve gross margin: supplier pricing, shipping rates, fewer returns. This lowers break-even directly.
- Fix the landing page: speed, clearer offer, reviews near the buy button.
- Raise prices if your conversion rate can absorb it - a 10% price rise with no drop in conversion improves ROAS by 10%.
Frequently asked questions
Is 2x ROAS good?
It is good if your gross margin is above 50%, roughly break-even at 50%, and a loss below that. Calculate 1 / margin to know for sure.
Is 4x ROAS good?
For most e-commerce businesses with 30 to 50% margins, yes - 4x is comfortably above break-even. For a 20% margin reseller it is still a loss.
What is the difference between ROAS and ROI?
ROAS is revenue divided by ad spend. ROI is profit divided by total investment. ROAS ignores product cost; ROI does not.