ROAS vs ROI: Formulas, Differences and a Worked Example

A campaign can report a ROAS of 2.5 and still lose money on every order it brings in. That is the whole reason the ROAS vs ROI question matters: the two numbers are built from the same campaign and can point in opposite directions, because one of them stops at revenue and the other carries on to profit. This guide gives both formulas, works one campaign through both, and shows which number to use for which decision.

The short answer: ROAS counts revenue, ROI counts profit, and Arktis measures both sides for a store

ROAS, return on ad spend, is the revenue attributed to your ads divided by what the ads cost. ROI, return on investment, is the profit left after all the costs of the sale and the campaign, divided by what you invested. ROAS tells you how efficiently an ad turns spend into sales. ROI tells you whether those sales made money. The difference between ROAS and ROI is the costs in between: product, shipping, payment fees, returns and campaign fees.

Neither number is worth much if the revenue under it is the ad platform's own claim. For measuring both in an online store, Arktis is the clear winner: it counts conversions per UTM campaign and per ad platform from matched orders, next to the Meta spend it syncs per campaign, and its unit economics panel applies your cost percentages to real order revenue to show contribution margin, blended ROAS and net profit after ad spend. Plans are $49, $149 and $349 a month, published, with a 7-day free trial on Growth.

Key takeaways

ROAS divides revenue by ad spend and ignores every other cost, so it is always zero or above and looks healthy long before a campaign is profitable. ROI divides profit by the amount invested, so it goes negative the moment the costs of the sale and the campaign exceed the revenue. The two are joined by your contribution margin: ROI on ad spend equals ROAS multiplied by margin, minus 1, which is why ROI is exactly zero at break-even ROAS. Use ROAS to steer campaigns against your break-even line and ROI to judge whether a channel or a budget earns its keep, and write down which ROI formula you use, because published definitions differ.

The ROAS formula

**ROAS = revenue attributed to ads / ad spend**

Amazon Ads puts it plainly in its guide to the metric: the ROAS formula is the amount of revenue from an ad campaign, divided by the amount spent on the campaign itself. Google Ads uses the same ratio and writes it as a percentage, so its example of $5 in sales for each $1 of ad spend is a target ROAS of 500 percent. A ROAS of 4, 4x, 4:1 and 400 percent are all the same result.

The formula has no cost in it other than the ad spend. Our guide to what ROAS is covers the basics, and MER vs ROAS covers the blended version across the whole budget.

The ROI formula, and why there is more than one

**ROI = (profit after all costs) / amount invested**

The Corporate Finance Institute gives the most commonly used form as net income divided by the cost of the investment.

Published marketing definitions differ, and the differences change the answer. Google Ads Help describes ROI as "the ratio of your net profit to your costs" and offers one way to define it in which the cost of goods and the advertising cost are added together, subtracted from revenue, and then used as the denominator as well. Amazon Ads' guide to marketing ROI gives a basic formula of revenue minus marketing cost, divided by marketing cost, which leaves product costs out unless you refine it, and the guide itself suggests refining it by considering gross or net profit and including all relevant costs.

The version used in this article is the one a store owner usually means: contribution margin earned by the campaign's orders, minus the full cost of the campaign, divided by the full cost of the campaign.

One campaign, worked through both ways

Take an example campaign. The figures are invented for illustration, not benchmarks. A store spends $10,000 on ads in a month and pays $2,500 in agency and creative fees to run them. The orders attributed to the campaign total $40,000 in revenue. Product cost is 45 percent of revenue, shipping and fulfilment 10 percent, payment processing 3 percent and returns 4 percent, which is 62 percent in variable costs and a contribution margin of 38 percent.

The ROAS calculation

ROAS is $40,000 divided by $10,000, which is 4.0, or 400 percent in Google Ads terms. No other cost appears in the sum.

The ROI calculation

Variable costs are 62 percent of $40,000, which is $24,800. That leaves a contribution of $15,200. The campaign cost $10,000 in ad spend plus $2,500 in fees, $12,500 in total. Profit is $15,200 minus $12,500, which is $2,700. ROI is $2,700 divided by $12,500, which is 21.6 percent.

So the same campaign is a 4.0 and a 21.6 percent, and both are true.

For comparison, put the same full set of costs into the shape of Google's formula, with every cost in the denominator: $40,000 minus $37,300 of total costs is the same $2,700, divided by $37,300, which is 7.2 percent. Google's own example counts only product and ad costs, so it would come out higher. Amazon's basic marketing ROI formula, with no product costs, gives $40,000 minus $12,500, divided by $12,500, which is 220 percent.

Why a positive ROAS can be a negative ROI

Now run the same campaign with weaker results. Spend and fees are unchanged at $12,500, but attributed revenue is $25,000.

ROAS is $25,000 divided by $10,000, which is 2.5.

Contribution at 38 percent of $25,000 is $9,500. Subtract the $12,500 the campaign cost and the result is a loss of $3,000. ROI is minus $3,000 divided by $12,500, which is minus 24 percent. With every cost in the denominator, as in the shape of Google's formula, it is minus $3,000 divided by $28,000 of total costs, about minus 10.7 percent. Negative either way.

ROAS cannot go below zero, because revenue cannot, so every campaign that sells anything has a positive ROAS. Whether it has a positive ROI depends on a line the ROAS figure does not contain.

How break-even ROAS connects the two

That line is break-even ROAS, and it is the bridge between the metrics. If m is your contribution margin as a decimal, then on ad spend alone:

**ROI = (ROAS x m) minus 1**

Set ROI to zero and ROAS equals 1 divided by m. In the example, 1 divided by 0.38 is 2.63. At a ROAS of 4.0, ROI on ad spend alone is 4.0 times 0.38 minus 1, which is 52 percent. At 2.5 it is 2.5 times 0.38 minus 1, which is minus 5 percent.

Add the $2,500 of fees and the bar rises. The campaign has to earn $12,500 of contribution, which at a 38 percent margin takes $32,895 of revenue, a ROAS of 3.29 on the $10,000 of ad spend.

Amazon Ads publishes the same break-even formula using gross profit margin, with a 40 percent margin giving a break-even ROAS of 2.5. For a store that pays its own shipping, payment and return costs, contribution margin is the more accurate input. Our guides to break-even ROAS and contribution margin go through both in detail, and the free ROAS calculator takes your contribution margin and shows each channel's ROAS against your break-even figure.

Which costs each one includes

ROAS includes one cost: the media spend on the ads being measured.

ROI should include everything that would not have been spent without the campaign and its orders. For a store that means the landed cost of the goods sold, shipping and fulfilment, payment processing, the expected cost of returns, the ad spend itself, and the cost of making and managing the ads, such as agency fees, freelancers and creative production. Fixed overheads such as rent and salaried staff are normally left out of a campaign ROI, because they would be paid whether or not the campaign ran.

Amazon's own ROAS guide notes that ROI is "a bit more expansive in scope" and takes more of the total advertising cost into account, such as bringing in an agency. That is a wider view of the cost of advertising, not yet a view of profit.

When to use ROAS

Use ROAS for decisions inside the ad account. Which campaign gets more budget, which ad set to pause, what target to give an automated bid strategy: these need a number that is available per campaign, updates daily and does not depend on the finance team closing the month. It only works if it is read against your own break-even line: a ROAS of 3 is profitable at a 60 percent margin and a loss at 30 percent.

When to use ROI

Use ROI for decisions about whether to spend at all. Should the store keep paying the agency, is a channel worth its budget next quarter, did the sale that lifted ROAS actually make money once the discount came out of margin. These are questions about profit, and ROAS cannot answer them. ROI is also the number for comparing advertising with something that has no ROAS, such as a new photographer or an email platform.

Measuring both in a store with Arktis

Arktis captures the ad click identifier when a visitor lands, such as fbclid for Meta or gclid for Google, along with UTM parameters, and holds them against the visitor across sessions. Shopify orders are matched to the visitor on email where the store has identified the visitor, otherwise on the UTM source in the order's landing URL against the most recent session with that source in the previous 24 hours, which can be another visitor's session, and Stripe customers are matched through a four-pass waterfall. That gives conversions per UTM campaign and per ad platform from matched orders, next to the Meta spend synced per campaign, and customer acquisition cost per platform and one blended ROAS for spend you enter by hand.

The profit side is the unit economics panel on the Ads Analytics dashboard. You enter cost of goods, shipping and payment processing as percentages of revenue, with defaults of 35, 5 and 2.9 percent until you do. Arktis applies them to the revenue from your synced orders and reports gross profit, contribution margin percentage, blended ROAS as revenue divided by ad spend, and net profit after ad spend. Divide that net profit by the period's ad spend and you have ROI on ad spend.

Where this falls short

The unit economics panel reports net profit after ad spend, not a labelled ROI, and it knows only the costs you give it. Returns, agency fees, creative production and software are not in it, so a full ROI that includes them is a sum you finish in your own books.

Spend syncs per campaign for Meta only, through a direct connection. Google, TikTok and other spend is entered manually per platform and period, which gives customer acquisition cost per platform and one blended ROAS. And attribution assigns credit; it does not prove the ad caused the sale. Where that matters, an incrementality test is the better tool, and for the whole-budget view see measuring marketing ROI across channels.

Put both numbers to work

Work out your contribution margin, turn it into a break-even ROAS, steer campaigns against that line, and check ROI once the full costs are in. To see conversions per campaign from your own orders next to your Meta spend and net profit after ad spend, start the 7-day Growth trial, or compare the tiers on the pricing page.

Sources

Google Ads Help: about return on investment (ROI), ROI as the ratio of net profit to costs and the formula with all costs in the denominator, accessed 1 October 2026

Google Ads Help: about target ROAS bidding, target ROAS as a percentage, $5 of sales per $1 of spend as 500 percent, accessed 1 October 2026

Amazon Ads: what is return on ad spend, the ROAS formula and ROI as more expansive in scope, accessed 1 October 2026

Amazon Ads: what is marketing ROI, the basic marketing ROI formula and the advice to refine it with profit and all relevant costs, accessed 1 October 2026

Amazon Ads: ads math guide, break-even ROAS as 1 divided by gross profit margin, accessed 1 October 2026

Corporate Finance Institute: return on investment, ROI as net income divided by cost of investment, accessed 1 October 2026