Marketing in a Minute – Episode 12 | Ahmed Moaaz

ROAS = advertising revenue ÷ advertising spend. A return of four times spend may look good until you account for product and shipping costs. That is why the next episode covers break-even ROAS.

What is ROAS?

ROAS stands for Return On Ad Spend. It answers a direct question: for every Egyptian pound spent on advertising, how much sales revenue came back?

ROAS = revenue attributed to advertising ÷ advertising spend.

For example, you spent EGP 5,000 on a campaign that generated EGP 20,000 in sales. ROAS = 20,000 ÷ 5,000 = 4. That is a return of “4 times” or 400%. Each advertising pound generated four pounds in sales.

You can find this metric in Meta, Google and TikTok ad managers. However, each platform calculates it using revenue it can observe and attribute. Treat the reported figure as an initial indicator and reconcile it with actual store orders whenever possible.

What is the difference between ROAS and ROI?

The two metrics look similar but measure different things:

• ROAS measures revenue: It does not account for product margins, shipping or returns. It compares attributed sales with ad spend.
• ROI measures profit: It accounts for the relevant costs to assess whether the investment made money.

A high ROAS therefore does not necessarily mean a profit. If the margin available before advertising is 25% of the order value, a ROAS of 3 leaves only a quarter of revenue to cover advertising after the other three quarters have been consumed by costs. That is not enough to cover an advertising bill equal to one third of revenue. Use ROAS for quick comparisons between campaigns and ads, and ROI to assess the wider economics.

How do you know whether your number is good?

There is no answer that fits every business. An acceptable figure depends on your own margins:

• High-margin products: Digital products or products with large margins may be able to cover advertising and leave profit at a ROAS of 2 or less.
• Low-margin products: Electronics or products facing intense price competition may need 6 or 8 times spend merely to break even.

Calculate your own break-even point first. The next episode explains it in detail. Below that point, a superficially impressive return can conceal a loss. A comfortable gap above it provides a buffer against market changes and returns.

Common mistakes when reading ROAS

• Trusting the platform without checking: Platforms may claim sales that would have happened anyway, especially in retargeting. Reconcile the report with actual orders and tracking data.
• Judging a campaign on its first day: Delivery systems need time to learn, and a customer may see the ad today and buy a week later. Allow a fair measurement period.
• Forgetting cancellations and returns: Deduct sales that were cancelled or returned. Otherwise you are measuring revenue the business did not keep.
• Chasing the ratio at the expense of scale: A tiny campaign may achieve a ROAS of 10 by reaching the easiest buyers. That does not mean it can scale. Doubling the budget can lower the ratio; what matters is whether it remains sufficiently above break-even.
• Comparing different audience situations: A campaign reaching people who already know you can behave differently from one introducing you to new people. Compare like with like.

A worked example

A store sells a product for EGP 400. After product cost, shipping and fees, EGP 120 remains per order before advertising, a margin of 30%. It launches two campaigns.

Campaign one: EGP 8,000 spend and EGP 32,000 sales from 80 orders. ROAS = 4. The orders contribute 80 × 120 = EGP 9,600 before advertising. After EGP 8,000 in spend, EGP 1,600 remains. The campaign is profitable on this calculation, but the buffer is thin.

Campaign two: EGP 8,000 spend and EGP 24,000 sales from 60 orders. ROAS = 3. The orders contribute 60 × 120 = EGP 7,200 before advertising. Against EGP 8,000 spend, that is an EGP 800 loss, despite a respectable-looking “3 times” in the dashboard.

The store’s break-even ROAS is approximately 3.33, calculated as 400 ÷ 120. Below it, the campaign loses money on these costs. Above it, there is room for profit, with any remaining overheads still to consider.

How can you improve ROAS in practice?

• Improve conversion first: A faster, clearer product page can improve revenue from the same spend without changing the ad.
• Increase average order value: Bundles and a suitable free-shipping threshold can increase revenue at the same acquisition cost.
• Work with your strongest audiences: Test people who know you and audiences similar to good customers, then expand carefully.
• Keep testing creative: A new image or headline may make a larger difference than a targeting adjustment.
• Stop waste: An ad that has spent a meaningful budget without a sale needs review, not endless “one last chances”.

How can you monitor the number without losing the day?

Use a light routine rather than constant checking: a quick daily look for major problems, a deeper weekly review for decisions, and a monthly table combining channels with actual store results. Record why you stopped one campaign or expanded another so experience accumulates instead of starting again each month.

The metric is a means, not the goal. The goal is a business that grows and makes money.

Summary

ROAS shows how efficiently advertising spend turns into attributed revenue, but it cannot see your margin. Calculate break-even first. Use ROAS to compare and improve campaigns, then use a full profit calculation to judge whether the activity is worthwhile. Reading revenue and profit together gives a more reliable picture than either alone.

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