What’s a Good ROAS for Meta Ads? It Depends on Your Business
If you’re running Meta ads, you probably want to know what a good ROAS looks like.
Is 2x enough? Should you be aiming for 3x or 4x? And if your ROAS starts to fall when you increase your budget, does that mean you should pull your spend back?
The slightly frustrating answer is that there isn’t a universally good ROAS.
A 4x ROAS could be brilliant for one business and unprofitable for another. A business achieving 2.5x could be in a much stronger position to scale than one achieving 5x.
It depends on your margins, average order value, customer acquisition costs, repeat purchase behaviour and, ultimately, what your business can afford to spend to acquire a customer.
ROAS, or return on ad spend, is still a useful metric. I look at it. I just don’t think it should be used in isolation to decide whether your Meta advertising is working.
What a good ROAS looks like depends on what profitable growth looks like for your business.
Why Meta ROAS doesn’t tell you the whole story
Meta reports the revenue it attributes to your advertising against what you’ve spent. That’s useful information, but it only gives you part of the picture.
Meta may attribute a purchase to an ad when that person already knew your brand or was an existing customer. Other marketing channels may also have played a part in their decision to buy.
This is where the difference between attribution and incrementality becomes important. If Meta attributes a sale to your advertising, that doesn’t necessarily mean the sale wouldn’t have happened without it.
That’s why I don’t look at Ads Manager in isolation. I want to understand what’s happening in the wider business too.
Start with what your business can actually afford
Before deciding whether your ROAS is good or bad, you need to understand the numbers behind it.
What can you actually afford to pay to acquire a customer or lead while still making the numbers work?
For an e-commerce business, I’ll want to understand things such as margins, average order value, new customer acquisition cost, repeat purchase behaviour and lifetime value.
For a service business, cost per lead alone doesn’t tell us enough either. You might be generating leads for £30, but if only 5% become paying customers, that could be less valuable than paying £50 for leads that convert at 20%.
Lead quality, close rate and the value of a new customer all affect what you can afford to pay.
This is why I establish the commercial numbers with clients before setting performance targets. Without that context, saying you want a 2x, 3x or 4x ROAS doesn’t really tell us very much.
A lower ROAS doesn’t necessarily mean worse performance
Let’s say you’re spending £500 a day and achieving a 4x ROAS. You increase the budget significantly and ROAS drops to 3x.
Looking only at ROAS, you might conclude that performance has got worse and reduce the budget again.
But what if that additional spend is bringing substantially more new customers into the business at an acquisition cost you can afford? You may be generating more revenue and more profit overall, despite the lower ROAS.
As you increase spend, there will usually come a point where you see diminishing returns. What matters is whether you can still afford to acquire those additional customers at that level of spend.
Sometimes protecting a higher ROAS can actually limit your growth.
What should you look at alongside Meta ROAS?
You don’t need a complicated measurement set-up to get a better picture.
For many of the businesses I work with, I’d rather identify a manageable number of commercial metrics and track them consistently than introduce lots of reporting that nobody ends up using.
New customer acquisition cost
If growth is the objective, I want to know how much it’s costing to acquire a new customer.
A blended ROAS can include revenue from existing customers, so it can look healthy without telling you enough about whether your advertising is bringing new people into the business.
Returning customers matter too, of course. But acquiring a new customer and generating another purchase from an existing one are different things, so it’s useful to understand the contribution each is making.
MER
Marketing Efficiency Ratio, or MER, looks at total business revenue in relation to total marketing spend.
It doesn’t tell you which individual channel caused a sale. Instead, it gives you a wider view of how efficiently your marketing spend is translating into revenue.
Because MER uses total business revenue and total marketing spend, it doesn’t rely on Meta, Google or another platform to tell you how much revenue it generated.
It does have limitations. As returning customer revenue grows, MER can start to look healthier even if acquiring new customers is becoming less efficient. That’s why some businesses also track aMER, or Acquisition MER, which looks specifically at new customer revenue in relation to ad spend.
I’m looking at these numbers together to understand whether the additional ad spend is actually translating into profitable growth.
New versus returning customer revenue
If revenue is increasing, I also want to understand where that growth is coming from.
There isn’t a universally correct split between new and returning customer revenue. It depends on the business, the product, how frequently people buy and what you’re trying to achieve.
But if new customer growth is the objective, you need to be able to see whether it’s actually happening.
Your own business data
Ads Manager is one source of information.
Depending on the business, I’ll also look at data from Shopify, GA4, your CRM and your own internal reporting.
No single source will give us a perfect view of every customer journey. I’m interested in whether the different sources are broadly telling us the same story, and investigating when they aren’t.
What about attribution and incrementality?
This can become complicated very quickly, and smaller businesses can sometimes feel as though they need a sophisticated measurement set-up before they can make sensible decisions about their advertising.
They don’t.
The level of measurement you need should be appropriate to the size and complexity of your business and the amount you’re spending.
There are increasingly sophisticated ways to measure incrementality as businesses and budgets grow. But the important thing is to recognise that just because Meta attributes a conversion to an ad, it doesn’t necessarily mean that conversion wouldn’t have happened anyway.
The more you invest in advertising, the more important it becomes to understand that distinction.
Your creative can affect how far you can scale
ROAS isn’t purely a media buying issue either.
If performance starts to plateau as you increase spend, changing budgets or campaign settings isn’t necessarily the answer. The problem may be creative.
You might have been relying too heavily on one message or angle, or the creative that worked brilliantly with one group of customers may not resonate with the next group of people you need to reach. It could also be that Meta simply hasn’t got enough genuinely different creative to work with.
This is why customer understanding and creative strategy are such an important part of the way I manage Meta advertising.
I want to understand not only which ads performed, but what we can learn from them. Which customer motivation did we tap into? Which message resonated? Was it the idea that worked, the execution, or both?
Those learnings can then inform what we test next, rather than starting from scratch every time.
So, what is a good ROAS for Meta Ads?
There isn’t one figure I can give you.
I certainly look at ROAS, but I wouldn’t use it on its own to decide whether your Meta advertising is working.
I want to know whether your advertising is helping you acquire customers or leads at a cost your business can afford, and whether increasing that investment is contributing to profitable growth.
Sometimes that means protecting efficiency. Sometimes there’s a good commercial reason to accept a lower ROAS in return for greater volume. And sometimes Ads Manager appears to be performing well while the numbers elsewhere in the business suggest we need to look more closely.
You need to know what profitable growth looks like for your business and judge your Meta performance in that context.
Not sure what your Meta numbers are really telling you?
If you’re investing in Meta but aren’t sure whether the numbers in Ads Manager reflect what’s actually happening in your business, I can help.
My approach brings together customer understanding, creative strategy, media buying and commercial performance, so we can make decisions based on the wider picture rather than one metric in a dashboard.
