In short
- ROAS = revenue from ads ÷ ad spend. ROI also counts every other cost.
- Your break-even ROAS is 1 ÷ your margin: at a 40% margin it is 2.5.
- CPM, CTR and conversion rate add up to your cost per sale, so fix the weakest step first.
What is ROAS?
ROAS (return on ad spend) shows how much revenue your ads brought in for every rupee spent on them. Divide the revenue that came from the ads by what the ads cost.
| Formula | Example |
|---|---|
| ROAS = revenue from ads ÷ ad spend | ₹40,000 of sales ÷ ₹10,000 of ads = a ROAS of 4 (often written 4x or 400%) |
ROAS only counts revenue that is tracked back to the ads, so it is only as good as your tracking. If purchases are not reported to the ad platform, the platform cannot show a ROAS.
What is a good ROAS?
A good ROAS is one above your break-even point, and that point depends on your margin. Break-even ROAS is 1 divided by your margin, where margin is what is left of each sale after the product, packing, shipping, marketplace or payment fees, but before ads.
| Margin before ads | Break-even ROAS | What it means |
|---|---|---|
| 20% | 5.0 | Each ₹1 of ads must bring ₹5 of sales just to break even |
| 30% | 3.3 | About ₹3.30 of sales per ₹1 of ads |
| 40% | 2.5 | ₹2.50 of sales per ₹1 of ads |
| 50% | 2.0 | ₹2 of sales per ₹1 of ads |
| 60% | 1.7 | About ₹1.70 of sales per ₹1 of ads |
For example, a product sells for ₹1,000 and costs ₹600 to make, pack, ship and collect payment for. The margin is ₹400, or 40%, so a ROAS below 2.5 loses money on the first order. A lower first-order ROAS can still make sense if customers come back and buy again.
ROAS vs ROI: what is the difference?
ROAS compares revenue with ad spend only. ROI (return on investment) compares profit with everything you spent. ROI = (revenue − all costs) ÷ all costs.
Take the ₹40,000 of sales from ₹10,000 of ads again. If the products, shipping and fees for those orders cost ₹24,000, the total cost is ₹34,000 and the profit is ₹6,000. That is a ROAS of 4 but an ROI of about 18%. ROAS tells you whether the ads work; ROI tells you whether the business made money.
What are CPM, CTR and CPC?
These three describe the top of the funnel: how much it costs to be seen, how often people click, and what each click costs.
| Metric | Formula | Example |
|---|---|---|
| CPM, cost per 1,000 impressions | Ad spend ÷ impressions × 1,000 | ₹10,000 ÷ 2,00,000 × 1,000 = ₹50 |
| CTR, clickthrough rate | Clicks ÷ impressions | 2,000 ÷ 2,00,000 = 1% |
| CPC, cost per click | Ad spend ÷ clicks | ₹10,000 ÷ 2,000 = ₹5 |
Google defines CTR the same way, as clicks divided by impressions, and average CPC as the total cost of your clicks divided by the number of clicks.
What are CPL and CPA?
CPL (cost per lead) is your ad spend divided by the leads it brought, such as form fills or WhatsApp enquiries. CPA (cost per acquisition or action) is your ad spend divided by the action you care about most, which for an online shop is usually a purchase.
If ₹10,000 of ads brings 40 leads, the CPL is ₹250. If the same spend brings 25 purchases, the CPA is ₹400. For a real-estate project, Digifyus brought the cost per lead down about 70%, to ₹299, with Meta lead ads. A low CPL only helps if the leads turn into customers, so track how many do.
How do the metrics fit together?
The metrics are links in one chain, so each one changes your cost per sale. CPC = CPM ÷ (1,000 × CTR). CPA = CPC ÷ conversion rate. ROAS = average order value ÷ CPA.
| Step | Number | Result |
|---|---|---|
| CPM | ₹100 | 1,000 people see the ad for ₹100 |
| CTR | 1% | 10 clicks, so a CPC of ₹10 |
| Conversion rate | 2% | 1 sale per 50 clicks, so a CPA of ₹500 |
| Average order value | ₹1,500 | A ROAS of 3 |
Double the CTR to 2% and the CPA halves to ₹250, so the ROAS doubles to 6. Lifting the conversion rate on your product page or listing has the same effect. Find the weakest link before raising the budget.
Which metric should you optimise for?
- Selling online: CPA and ROAS, checked against your break-even ROAS.
- Collecting enquiries: CPL, plus how many leads become customers.
- Testing new ads: CTR and CPC first, to see which creative stops the scroll.
- Getting known: CPM and reach, with sales measured over a longer time.
New to all of this? Start with our guide to what performance marketing is.
Ad metric questions, answered
Is a ROAS of 2 good?
Only if your margin before ads is above 50%. A ROAS of 2 breaks even at a 50% margin, loses money below it and makes money above it, before counting repeat orders.
What is the difference between CPL and CPA?
CPL counts leads, such as enquiries or form fills. CPA counts the action you choose, most often a purchase. A business that sells over WhatsApp might track CPL first, then the cost per sale once leads are followed up.
Does a high CTR mean the ad is good?
Not on its own. A high CTR means the ad gets attention, but the clicks still have to become leads or sales. Judge an ad by its CPA or ROAS, and use CTR to compare creatives.
Where do I find these numbers?
Meta Ads Manager and Google Ads both report spend, impressions, clicks, CTR, CPC and your results. ROAS needs purchases and their values to be tracked. Margin and ROI come from your own accounts, so keep a simple sheet next to the ad reports.
Sources: Clickthrough rate (CTR), Average cost-per-click and CPM (Google Ads Help) · How Meta charges for ads (Meta Business Help Centre)
Written by Arnav, founder of Digifyus, a digital marketing agency for D2C and e-commerce brands. Published , updated .