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ROAS vs ROI vs MER: which number tells the truth?
The short answer
ROAS measures revenue per rupee of ad spend; ROI measures profit per rupee invested; MER measures total revenue against total marketing spend. A campaign can show a 4x ROAS and still lose money if margins are thin. ROI tells you whether you made money. MER tells you whether marketing as a whole is getting more or less efficient, without platforms double-counting.
Side by side
| ROAS | ROI | MER | |
|---|---|---|---|
| Formula | Revenue ÷ ad spend | (Profit − cost) ÷ cost | Total revenue ÷ total marketing spend |
| Includes margin? | No | Yes | No |
| Includes all costs? | Ad spend only | Everything you choose | All marketing spend |
| Level | Campaign or platform | Business or initiative | Business |
| Double-counting risk | High across platforms | Low | None |
| Best for | Optimising campaigns | Profitability decisions | Weekly business health |
A rupee example
A brand spends ₹2 lakh on ads and records ₹8 lakh in ad-attributed revenue: 4x ROAS. Gross margin is 45% and other variable costs take another 10%, leaving ₹2.8 lakh contribution. After ad spend, profit is ₹80,000: ROI of 40%. If total revenue including organic was ₹12 lakh against ₹3 lakh total marketing spend, MER is 4.0.
Scenarios, and which metric to use
- Choosing between two ad sets on Meta — ROAS (or CPA) within the platform
- Deciding the monthly marketing budget — MER and contribution margin
- Deciding whether to keep a channel — incremental ROI from a holdout test
- Reporting to founders or investors — MER, new-customer CAC, payback and contribution
- Setting campaign targets — break-even ROAS derived from contribution margin
Formulas side by side
| Metric | Formula | Example |
|---|---|---|
| ROAS | Revenue from ads ÷ ad spend | ₹4,00,000 ÷ ₹1,00,000 = 4x |
| ROI | (Profit − investment) ÷ investment | (₹1,40,000 − ₹1,00,000) ÷ ₹1,00,000 = 40% |
| Break-even ROAS | 1 ÷ contribution margin % | 1 ÷ 35% ≈ 2.86x |
| MER | Total revenue ÷ total marketing spend | ₹12 lakh ÷ ₹3 lakh = 4x |
Try your own numbers with the ROAS calculator and break-even ROAS calculator.
Why good ROAS can hide losses
- Revenue counted on placed orders, not delivered orders
- Returns and RTO not deducted
- Discounts and payment fees ignored
- Brand and retargeting campaigns inflating blended ROAS
- Agency, creative and tool costs excluded from ROI
Which metric for which decision
| Decision | Metric |
|---|---|
| Pause or scale an ad set | ROAS or CPA vs target |
| Set campaign targets | Break-even ROAS from margins |
| Monthly marketing review | MER and contribution margin |
| Board or investor reporting | ROI, contribution margin, CAC payback |
Pros and cons of each
ROAS
- Pros: simple and platform-reported
- Cons: ignores costs other than ad spend
ROI
- Pros: reflects profit
- Cons: needs full cost data
Example: a profitable-looking campaign that lost money
A campaign reported 3× ROAS, but after product costs, shipping, returns and discounts, it lost money per order. Break-even ROAS was 3.5×.
Frequently asked questions
What's a good ROAS?
One above your break-even ROAS. There's no universal number.
Why use MER if we have ROAS?
Because platforms often claim the same sale. MER can't be double-counted.
Should the board see ROAS?
Boards usually care more about MER, CAC, contribution and payback.
Why does ROAS look good while profit is falling?
Common causes: rising returns, discounting, higher shipping costs or platforms double-counting sales. Check contribution and MER.
Is a 3x ROAS good?
Only if 3x is above your break-even ROAS. With a 40% contribution margin, break-even is 2.5x, so 3x is profitable; with 25%, break-even is 4x, so 3x loses money.
Should we optimise for ROAS or ROI?
Optimise campaigns with ROAS targets derived from ROI requirements. The target ROAS should reflect margins and business goals.
What's the difference between ROAS and MER?
ROAS is usually platform- or campaign-specific; MER divides all revenue by all marketing spend, avoiding double-counting between platforms.
What is break-even ROAS?
The ROAS at which revenue just covers ad spend and variable costs — use our break-even ROAS calculator.
More comparisons
All comparisonsServices mentioned
Terms used on this page
Do the maths
Run your numbers before you spend a rupee.
Our free calculators turn margins, AOV and conversion rates into the targets that actually matter: break-even ROAS, affordable CAC and budget per stage.