A campaign at a 40% margin
Ad spend: $1,000, revenue: $3,500, margin: 40%
ROAS: 3.5x · Break-even ROAS: 2.5x (1 ÷ 0.4) · Profitable, since 3.5x clears 2.5x.
Calculate ROAS and the break-even ROAS from ad spend, revenue and contribution margin.
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A ROAS of 3x sounds healthy until it's compared against the margin the sale actually carries — an ad spend that's profitable at a 60% margin can lose money at a 20% one. Break-even ROAS is the number that actually matters: below it, more ad spend loses more money, not less.
Ad spend: $1,000, revenue: $3,500, margin: 40%
ROAS: 3.5x · Break-even ROAS: 2.5x (1 ÷ 0.4) · Profitable, since 3.5x clears 2.5x.