E-commerce
Break-even ROAS
The return on ad spend at which a sale exactly covers its product, delivery and ad costs.
What it is
It depends on margin. A product with a 50% margin breaks even at a ROAS of 2; a product with a 25% margin needs 4.
Why it matters
For e-commerceIt turns a ROAS target from a guess into a number tied to profit, product by product.
How it is measured
Formula
Break-even ROAS = 1 / contribution margin (as a share of revenue)Divide 1 by the contribution margin as a share of revenue.
A common mistake
Using one ROAS target for every product, which over-spends on thin-margin items and starves the profitable ones.
All terms