Putting money into Amazon ads but not getting the results you hoped for?
Many sellers fall into the trap of thinking more ad spend will automatically lead to more sales. The truth is, without tracking how much revenue your ads are bringing in, you could be wasting your budget instead of scaling your business.
That’s where ROAS (Return on Ad Spend) comes in. It’s a simple yet powerful metric that shows how efficiently your advertising dollars are working. ROAS helps you see which campaigns are profitable, which ones are draining your budget, and where adjustments are needed.
It’s more than just a number—it’s the key to smarter ad decisions and stronger profit margins. Especially for Amazon sellers in Australia, where every ad dollar counts, knowing your ROAS can make the difference between growth and guesswork.
We’ll break down what ROAS means, how it compares to other metrics like ACoS and ROI, what’s considered a “good” ROAS on Amazon, and how to improve it with clear, actionable steps.
What is the return on ad spend (ROAS)?
Return on Ad Spend (ROAS) is a key metric that tells you how much revenue you earn for every dollar you spend on advertising. It helps you understand how effective your ad campaigns are and whether they’re making you money or costing you.
The formula is simple: ROAS = Total Revenue from Ads ÷ Total Ad Spend
ROAS is especially important for Amazon sellers because it gives a clear view of how well your campaigns are performing. A high ROAS means your ads are working efficiently and generating profit. A low ROAS could signal that your targeting, bidding, or product page needs improvement.
Unlike ACoS (which focuses on the cost side), ROAS focuses on the return. It’s a quick way to measure the value you’re getting from your ad spend and a useful guide for making smarter decisions with your Amazon advertising strategy.
Why is ROAS important?
- Measures ad profitability: Tells you exactly how much revenue you earn per dollar spent on ads.
- Reveals campaign performance: Helps identify which ads are working and which are wasting budget.
- Supports better budgeting: This lets you allocate more budget to high-performing campaigns.
- Drives smarter decisions: Gives you data to optimize bids, keywords, and targeting.
- Protects your profit margins: Ensures your ad spend doesn’t eat into your bottom line.
- Tracks true return on investment: Shows if your advertising is helping your business grow.
- Essential for scaling: Helps you grow confidently by knowing which strategies to double down on.
You can opt for an Amazon advertising agency that tracks ROAS closely, as it shows whether your ads are actually making money or just spending it.
How do you calculate Return on ad spend (ROAS)?
ROAS (Return on Ad Spend) is one of the most important metrics for Amazon sellers to track, especially when you’re investing in PPC advertising. It tells you how much revenue you’re making for every dollar you spend on ads. A clear ROAS helps you understand whether your ad campaigns are profitable or not.
For example, if you spent $100 on ads and earned $400 in sales from those ads, your ROAS would be:
$400 ÷ $100 = 4.0 (or 4x). This means for every $1 you spent on advertising, you made $4 in return.
Now let’s break it down further:
- Ad spend is the total amount of money you spend on Amazon PPC campaigns.
- Ad revenue refers only to the sales generated directly through your ads (not total sales).
Understanding your ROAS helps you decide whether to scale, pause, or adjust your campaigns. If your ROAS is too low, it could mean your ads aren’t converting well, or your cost-per-click (CPC) is too high.
Keep in mind that a “good” ROAS depends on your product’s margins. A seller with a 60% profit margin can afford a lower ROAS than someone with just 20%.
So always compare ROAS in context with your cost structure. For first-time sellers, regularly checking ROAS is the key to making smart, data-driven ad decisions and growing profitably on Amazon.
What is the difference between ROAS and ROI?
| Aspect | ROAS (Return on ad spend) | ROI (Return on investment) |
| Scope | Focuses only on advertising performance—how much revenue your ads generate relative to what you spend. | Considers all business-related expenses (product cost, ads, packaging, shipping, fees) to calculate net profit. |
| Primary focus | Efficiency of ad spend—are your campaigns bringing in enough revenue to justify the cost? | Overall business profitability—is your entire investment turning into profit after all costs? |
| Formula | ROAS = Ad Revenue ÷ Ad Spend | ROI = (Net Profit ÷ Total Investment) × 100 |
| Key inputs | Total sales from ads only Total ad spend | Total revenue Total expenses (product, ads, fulfillment, fees, etc.) |
| Metric type | Ratio (e.g., 3.5x = $3.50 in revenue for every $1 spent on ads) | Percentage (e.g., 40% ROI = 40% return on total investment) |
| Use cases | Evaluate and optimize Amazon PPC campaigns Scale profitable campaigns Cut losses on poor performers | Assess overall product or business viability Compare profitability between multiple products or brands |
| Example | Spent $100 on ads Earned $500 in ad-driven sales ROAS = 500 ÷ 100 = 5.0x | Total investment: $300 (product cost: $150, ads: $100, fees: $50) Revenue: $500 Profit: $200 ROI = (200 ÷ 300) × 100 = 66.67% |
| Limitations | Doesn’t account for product costs, shipping, or Amazon fees—looks only at ad revenue | Requires accurate tracking of all expenses—not just ads |
| Reporting source | Found in Amazon Ads Manager and third-party PPC tools | Calculated manually or using profit tracking tools like Sellerboard, Helium 10 Profits, or spreadsheets |
| Ideal for | Marketers managing ad budgets Sellers optimizing PPC strategy | Business owners evaluating total profitability Sellers deciding which products to scale or discontinue |
| Decision impact | Helps decide how and when to spend ad budget | Helps decide what products or campaigns are truly profitable |
What is the difference between ROAS and ACOS?
ROAS (Return on Ad Spend) and ACoS (Advertising Cost of Sales) are both used to measure Amazon PPC performance—but they show the same data from opposite angles.
ROAS tells you how much revenue you earned for every dollar spent on ads. The higher the ROAS, the better your ad performance.
Formula: ROAS = Ad Revenue ÷ Ad Spend
Example: If you earn $500 in sales from $100 in ads, your ROAS is 5.0 (or 5x).
ACoS, on the other hand, tells you what percentage of your sales went into ad spend. The lower the ACoS, the better.
Formula: ACoS = (Ad Spend ÷ Ad Revenue) × 100
Example: If you spend $100 to make $500 in sales, your ACoS is 20%.
So, what’s the difference?
They are inverses of each other:
- High ROAS = Low ACoS
- Low ROAS = High ACoS
Which one should you use?
It depends on your preference. ROAS is easier to understand for comparing returns, while ACoS is more common inside Amazon’s ad dashboard. Both are important for measuring ad efficiency.
What is considered a “good” Amazon ROAS?
A “good” ROAS (Return on Ad Spend) on Amazon depends on your product margins and business goals, but here’s a general guide to help sellers understand what to aim for:
- ROAS of 2.0 (2x) — For every $1 you spend on ads, you earn $2 in revenue. This might work for high-margin products, but it can be tight for low-margin items.
- ROAS of 3.0–4.0 (3x to 4x) — This is a solid target range for many Australian sellers. It allows room for Amazon fees, shipping costs, GST, and product expenses while still making a profit.
- ROAS of 5.0+ (5x or more) — Excellent performance. If you can maintain this while scaling, your campaigns are likely very profitable.
Keep in mind, a higher ROAS isn’t always better if your sales volume is too low. Aim for a balance between return and growth. Also, consider your profit margins—if your margin is 30%, you’ll typically need a ROAS of at least 3.3 to break even. Always calculate based on your numbers.
Good Amazon ROAS starts with strong Amazon account management, where campaigns, listings, and budgets are all handled carefully to drive better returns.
Factors that affect your Amazon ROAS
Your Amazon ROAS (Return on Ad Spend) isn’t just about how much you spend on ads—it’s influenced by many moving parts. Understanding these factors can help you improve ad performance and make better decisions.
1. Product price
Higher-priced products usually have more room for ad spend, which can lead to better ROAS if conversions are steady.
2. Conversion rate
If shoppers click but don’t buy, your ad spend goes up with little return. A high conversion rate means more sales from fewer clicks—boosting your ROAS.
3. Click-through rate (CTR)
A low CTR could mean your keywords, title, or main image aren’t attracting attention. The better your ad’s appeal, the higher your chances of getting profitable clicks.
4. Ad relevance and targeting
Irrelevant keywords lead to wasted spend. Tight, well-researched targeting improves relevance and results.
5. Competition and bidding:
High competition drives up cost-per-click (CPC), which can hurt ROAS unless your product converts well.
6. Listing quality
Strong images, clear bullet points, and Amazon A+ Content improve engagement and help convert more clicks into sales.
Tips to improve your Amazon ROAS
- Optimize your product listings
- Use high-converting keywords
- Focus on profitable campaigns
- A/B test your creatives
- Lower bids during low-converting times
- Use negative keywords
- Monitor and adjust campaigns regularly
- Improve product images and titles
- Leverage Sponsored Brands and Display ads
- Align ads with top-performing ASINs
Is your ROAS working for you?
ROAS isn’t just a number—it’s a direct reflection of how efficiently your Amazon ads are performing. Whether you’re spending $50 or $5,000, knowing your ROAS helps you stop guessing and start scaling profitably. From understanding how to calculate it, to knowing the difference between ROAS, ACoS, and ROI, it’s clear that mastering this metric is essential for making smarter, data-driven ad decisions.
If your current ROAS isn’t where you want it to be or if you’re not sure how to interpret the numbers, working with experienced Amazon consultants can help. They’ll analyze your campaigns, fine-tune your targeting, and guide your strategy to turn every ad dollar into measurable growth.
