Ratios and unit economics

Break-even ROAS

The return advertising needs simply to pay for itself.

Formula

1 / contribution margin before advertising

Break-even ROAS is the revenue each advertising euro must bring before the store is any better off: the reciprocal of the contribution margin an order leaves before advertising. At a 52,6% margin after goods, parcel and fees, an ad euro needs about 1,90 euro of net revenue just to stand still.

It is a floor rather than a target. Above it the advertising is building profit, whatever the bank balance feels like this week; below it, every euro spent buys a loss, whatever a platform's own dashboard reports.

Because it is derived from margin, it moves whenever margin does. A supplier increase, a heavier product mix or a returns spike all raise the revenue each ad euro must produce, which is the deepest reason ad decisions belong on a statement that is recomputed rather than on a threshold set once a year.

The blended version is the one to act on, since the platforms cannot double count what your own books say you took. Comparing spend against your own revenue removes the overlap that makes platform-reported returns add up to more revenue than the store ever had.

Related terms