Return on Ad Spend. The revenue generated for every dollar spent on advertising. ROAS = Revenue / Ad Spend.
A 4× ROAS means for every $1 spent on ads, $4 in revenue was generated. D2C brands should target minimum 3× ROAS for most verticals, though the profitable ROAS threshold depends on your gross margin. A brand with 70% gross margin can be profitable at 2.5× ROAS, while a brand with 40% gross margin may need 5×+ ROAS to stay profitable.
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