Gross ROAS vs net ROAS: what's the difference?

Your ad dashboard says the campaign is returning 4x, but your bank balance doesn't look like it. That gap is usually the difference between gross ROAS and net ROAS. Gross ROAS counts revenue. Net ROAS counts what's left once the product, delivery and the ads have been paid for. This guide explains both, works through the same campaign both ways, and shows how to set a target you can actually use. If you're new to ROAS in general, start with what is a good ROAS?

The short answer

• Gross ROAS = revenue from ads ÷ ad spend. This is the "ROAS" that Google Ads, Meta and most platforms report.
• Net ROAS = (revenue − cost of goods − other variable costs − ad spend) ÷ ad spend. In other words, net profit per £1 of ad spend.

Gross ROAS tells you how much selling the ads did. Net ROAS tells you whether that selling made money. A campaign can have a healthy gross ROAS and a negative net ROAS at the same time.

Warning: "net ROAS" doesn't have one agreed definition

Unlike gross ROAS, which everyone calculates the same way, "net ROAS" is used for at least three different things. Before you compare your number with anyone else's, check which one they mean:

1. Revenue minus ad spend, ÷ ad spend. This is just gross ROAS minus 1, so a 4x gross ROAS becomes 3x. It removes the ad cost but ignores product costs, so it still flatters low-margin businesses.
2. Gross profit ÷ ad spend. This is often called profit ROAS or POAS (profit on ad spend). It swaps revenue for gross profit, so margin is built in. Break-even is exactly 1.0.
3. Net profit after ads ÷ ad spend. This is gross profit minus the ad spend, divided by the ad spend. It's the strictest version and the one this guide means by "net ROAS". Break-even is exactly 0.

Versions 2 and 3 always differ by exactly 1 (POAS of 1.6 = net ROAS of 0.6), so they tell the same story. Pick one and use it consistently. Version 1 is the one to be wary of, because it looks like a profit measure but isn't.

One campaign, worked both ways

Say you spend £1,000 on Meta ads and they bring in £4,000 of sales. Your gross margin is 40% (after product cost, packaging, delivery and payment fees), so those sales cost you £2,400 to fulfil.

Now keep everything the same except the margin, which drops to 20%:

That's the whole case for net ROAS in two boxes: the same gross ROAS, opposite outcomes.

Side by side

Converting between them

If you know your gross margin, you don't have to rebuild the numbers every time. You can go straight from the platform's gross ROAS:

• POAS = gross ROAS × gross margin. 4.0x × 40% = 1.6x.
• Net ROAS = (gross ROAS × gross margin) − 1. (4.0 × 0.4) − 1 = 0.6x.
• Break-even gross ROAS = 1 ÷ gross margin. At 40% margin it's 2.5x; at 20% it's 5.0x; at 70% it's about 1.43x.

That last line is the one most worth writing on a sticky note. It turns any gross ROAS on a dashboard into a yes or no.

What counts as a cost in "net"

Net ROAS is only as honest as the costs you put into it. For it to mean anything, include every cost that goes up when you sell one more unit:

• Cost of goods: what you paid for the product or its materials.
• Delivery and packaging: including any free-delivery threshold you absorb.
• Payment and marketplace fees: Stripe, PayPal, Shopify Payments, Amazon or Etsy fees. Our unit economics calculator works these out per sale.
• Returns and refunds: if 10% of orders come back, 10% of that revenue never really existed.
• Agency or freelancer fees tied to the campaign, if you want the true return on the whole ad effort, not just the media spend.

Leave out fixed overheads like rent, salaries and software. They don't change with each order, so they belong in your overall profit, not in a per-campaign ratio.

A UK trap: VAT in the revenue figure

If you're VAT-registered, check whether the revenue your ad platform reports includes VAT. Conversion values are often passed through from the checkout total, which includes 20% VAT, but that VAT goes to HMRC, not to you. A reported gross ROAS of 4.8x on VAT-inclusive revenue is really 4.0x on the money you keep (4.8 ÷ 1.2). That's a big enough gap to move a campaign from profit to loss. You can strip VAT out of any figure with our VAT calculator, or read how to work out VAT.

When to use which

Use gross ROAS for day-to-day comparisons inside one ad account: this ad set against that one, this week against last week. The margin is roughly the same across them, so the ratio still ranks them correctly, and it's the number the platform optimises for.

Use net ROAS (or POAS) for anything involving money decisions: setting a target, deciding whether to scale a campaign, comparing products with different margins, or reporting to a business owner. It's also the right measure when your product range mixes high- and low-margin items, because a gross ROAS target will quietly push spend towards whatever sells most, not what earns most.

Common mistakes

Setting one ROAS target across products with different margins. A 4x target is too strict for a 60%-margin product and too loose for a 20%-margin one. Set the target per margin band, or switch to POAS.

Using "net ROAS" to mean revenue minus ad spend. It sounds like profit but ignores product costs. Check the definition before comparing numbers.

Trusting platform-attributed revenue. Each platform tends to claim credit for sales that other channels or repeat customers would have delivered anyway. Your blended figure (total revenue ÷ total ad spend) is usually lower than any single dashboard shows.

Ignoring repeat purchases. A first-order net ROAS of slightly below zero can still be a good campaign if customers come back. Just make that a deliberate decision with a known payback period, not an accident.

Related guides and calculators

• What is a good ROAS?: break-even ROAS and how margin sets your target.
• Unit economics explained: profit per sale after every variable cost.
• ROAS calculator: gross ROAS, profit after ads and break-even in one place.
• Burn rate & runway calculator: how long a marketing budget will last.

Frequently asked questions