What is target ROAS? tROAS bidding explained
Target ROAS is the average return on ad spend you tell an automated bid strategy to aim for. Here is what it means in Google Ads and Meta, how to set it from your margin, a worked example and what happens when it is too high.
Target ROAS is the return on ad spend you tell an ad platform's bidding algorithm to aim for on average. In Google Ads it is the target ROAS (tROAS) bid strategy, and Meta's closest equivalent is minimum ROAS bidding. Set it above your break-even ROAS so the conversions the algorithm buys still leave a profit.
How do you calculate target ROAS?
Start from your break-even ROAS, then add the profit you want to keep after ads.
| Step | Formula |
|---|---|
| Break-even ROAS | 1 ÷ contribution margin |
| Target ROAS | 1 ÷ (contribution margin − target profit margin) |
| Google Ads entry | Target ROAS × 100, as a percent |
Google's Target ROAS help page defines the target as "the average conversion value (for example, revenue) you'd like to get for each dollar you spend on ads" and expresses it as a percentage, so a target of 4.0 is entered as 400%.
Target ROAS example
Illustrative figures for a UK homeware store, net of VAT:
- Contribution margin: 45%, so break-even ROAS is 1 ÷ 0.45 = 2.22.
- Goal: keep 15% of net revenue as profit after ads.
- Target ROAS: 1 ÷ (0.45 − 0.15) = 3.33, entered in Google Ads as 333%.
At ROAS 3.33, £10,000 of spend brings £33,300 of revenue and £14,985 of contribution, leaving £4,985 after ads: about 15% of revenue.
What is a good target ROAS?
One your account can actually reach. Google says "Your Target ROAS should be set based on your business goals as well as your historical ROAS performance as a reference", and warns that "setting a target that's too high may limit the amount of traffic your ads may get". Meta's bid strategy documentation says the same of minimum ROAS: "Setting the benchmark too high may lead to under-delivery." If today's ROAS is well below your goal, start near it and step up.
Related terms
- ROAS: the result you measure after the fact.
- POAS: profit on ad spend, for judging bids on margin rather than revenue.
- CPA: the cost-based alternative, used with target CPA bidding when conversions have similar values.
How Grower helps
Grower's recommendation engine suggests changes every week with the evidence behind them, labeled by risk. Approve one and Grower pushes it to the channel for you, and you can dismiss or undo any time.
Frequently asked questions
What is the difference between ROAS and target ROAS?
ROAS is a result: the revenue your ads produced divided by what they cost. Target ROAS is an instruction: the average ROAS you ask a bidding algorithm to aim for when it sets bids in each auction. Your reported ROAS moves around the target, and it can fall short when the target is too high for the demand available.
Should target ROAS include VAT?
Match it to the conversion values your tags send. If your store sends VAT-inclusive order values to Google or Meta, a target worked out on net revenue will be too low by the VAT rate. Either send values net of VAT or gross up the target, and recalculate it whenever prices, discounts or costs change.
Why is my campaign not spending on target ROAS?
The target is probably higher than the campaign can deliver at its current volume, so the algorithm skips auctions it does not expect to meet it. Google and Meta both warn that a high target limits delivery. Lower the target toward your recent ROAS, check that conversion values are tracked, then raise it gradually.
Find the floor before you set the target: use the free break-even ROAS calculator, then add your profit goal.