What is ROAS and What is a Good ROAS?

ROAS (Return on Ad Spend) is the primary metric for measuring paid advertising profitability. It tells you how much revenue you earn for every pound spent on advertising. A ROAS of 4:1 means you earn £4 in revenue for every £1 you spend on ads.

Calculating ROAS is straightforward: divide your total revenue from ads by your total ad spend. If you spent £1,000 on Google Ads and generated £5,000 in revenue, your ROAS is 5:1 or 500%. This is different from ROI (Return on Investment) which also accounts for costs like agency fees, staff time, and product costs.

A good ROAS depends entirely on your business model and margins. E-commerce businesses with 40-60% margins typically need a minimum ROAS of 3:1 to be profitable. Service businesses with higher margins can be profitable at 2:1 or even lower. SaaS companies with high lifetime customer values may accept 1:1 ROAS knowing the customer will generate revenue over years.

The benchmark ROAS across UK industries breaks down roughly as follows. E-commerce averages 4:1, lead generation services average 5:1, B2B professional services average 3:1, and local services like plumbers or electricians average 6:1 due to high job values relative to click costs.

Improving ROAS requires working on multiple levers simultaneously. Better keyword targeting reduces wasted spend on irrelevant searches. Improved ad copy increases click-through rates without increasing costs. Landing page optimisation converts more visitors into customers. And bid management ensures you pay the right price for each click based on its conversion probability.

AI-powered campaign management significantly improves ROAS by monitoring these levers continuously. Rather than a human checking campaigns weekly, AI agents at Foundry Works analyse performance every four hours, catching wasted spend quickly and reallocating budget to top-performing keywords and audiences in near real-time.