What it means
ROAS is calculated as: revenue attributed to ads divided by ad spend. A ROAS of 3.0 means you made $3 in attributable revenue for every $1 in ad spend. The ratio is sometimes expressed as a decimal (3.0) or as a multiple (3x).
The hard part is 'attributed'. Different systems, different attribution windows, and different revenue-recognition rules can produce wildly different ROAS for the same campaigns. A 7-day-click attribution will report higher ROAS than 1-day-click. A campaign reporting on order-confirmed will look better than one reporting on payment-cleared.
Why it matters
ROAS is the simplest signal of whether a campaign is making money or losing it. Taken at face value, it tells you which campaigns to scale and which to cut. But it is also the easiest metric to game by changing the rules underneath: shifting attribution, including organic conversions, recognising lifetime value as if it were first-purchase revenue.
The right ROAS target depends on your margin. A 90 percent margin SaaS business can run profitably at 1.5x; a 20 percent margin retailer needs at least 5x just to break even.
Example
A boutique furniture brand runs Meta ads with a stated ROAS of 4.0. Closer inspection: they are using 7-day-click 1-day-view attribution, which credits any purchase made within a week of seeing the ad even if the customer would have bought anyway. Switching to 1-day-click only, the real ROAS is 1.8. Still profitable at their margin, but not the headline number they thought.