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Return on ad spend (ROAS) is the revenue an ad campaign produces divided by what was spent on the ads. A ROAS of 4 means $4 of revenue for each $1 of ad spend. It ignores other costs and profit margin, so it is not the same as return on investment (ROI).
In short
Work through an example. If $2,000 of ads brings $8,000 of revenue, ROAS is 4. If the products carry a 20% margin, the profit on that revenue is $1,600, which is less than the ad spend, so the campaign loses money even though ROAS looks strong. The figures are an illustration, not a benchmark.
Use ROAS to compare ads with each other, and use ROI, which counts all costs, to judge the business result. Know your break-even ROAS, which is 1 divided by your margin, before you set a target. Our guide on how to measure digital marketing ROI shows the full sum.
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