CPS and ROAS: measuring advertising by sales
Cost per sale (CPS) is ad spend divided by the number of sales; ROAS (return on ad spend) is revenue divided by ad spend. A ROAS of 4 means every ₹1 of advertising brought ₹4 of sales. For online stores they are usually the most useful measures, because they connect ads directly to revenue.
The formulas
- CPS = spend ÷ sales
- ROAS = revenue from ads ÷ spend
- Break-even ROAS = 1 ÷ gross margin (for example, 1 ÷ 40% = 2.5)
What you need to track
- A sale postback with the order amount, currency and your order ID (so the same order is never counted twice).
- A refund or reversal event, so cancelled orders come out of your reported sales.
- A clear attribution window (for example, sales within 30 days of the click).
Improving ROAS
Move budget toward the placements, countries and devices with the highest revenue per click, not only the most sales. Watch average order value as well as conversion rate: a source with fewer but larger orders can be the best one.
Common questions
Is a high ROAS always good?
A very high ROAS on a tiny budget can hide missed volume. Look at total profit as well as the ratio.
Why does my ROAS differ between tools?
Different attribution windows and models count the same sale differently. Compare like with like, and prefer server postbacks matched to clicks.