What is Break-even ROAS?
Break-even ROAS (Return on Ad Spend) is the minimum ROAS you must achieve for a campaign to not lose money.
Notch - Content Team
Dec 9, 2025, 7:34 PM
Table of contents
It represents the exact point where revenue generated from ads = cost of advertising, leaving zero profit and zero loss.
If your actual ROAS is above break-even, you’re profitable.
If it’s below break-even, you’re scaling at a loss.
Break-even ROAS is the foundational metric used to determine bidding limits, scaling thresholds, and optimization strategies.
Why Break-even ROAS Matters
Break-even ROAS is the “financial checkpoint” that guides nearly every media-buying decision.
It helps marketers:
know whether their campaigns are profitable
set sustainable Bid Cap or Cost Cap strategies
identify which creatives are worth scaling
avoid bleeding money during testing
understand how discounts impact profitability
determine if rising CPMs still allow margin
make decisions based on unit economics, not vanity metrics
Without knowing break-even ROAS, scaling becomes guesswork and often leads to hidden losses.
How Break-even ROAS Is Calculated
The formula is straightforward:
Break-even ROAS = 1 / Profit Margin
Where Profit Margin = (Revenue – Cost of Goods Sold) ÷ Revenue
Example:
If your profit margin is 25 percent:
Break-even ROAS = 1 ÷ 0.25 = 4.0 (400 percent)
This means:
For every ₹1 spent, you must make ₹4 in revenue to break even.
Factors That Influence Break-even ROAS
1. Product Margins
Low-margin products require higher break-even ROAS.
2. COGS (Cost of Goods Sold)
Packaging, manufacturing, fulfillment, shipping.
3. Discounts / Offers
Every discount raises break-even thresholds.
Related term: Offer Iteration
4. Payment Fees / Shipping Costs
Higher operational costs → higher break-even point.
5. Returns & Refund Rates
High returns shrink true profit margins.
6. Bundles & AOV Shifts
Higher AOV lowers break-even ROAS.
How Break-even ROAS Impacts Media Buying
1. Creative Testing
You can kill losing creatives faster by comparing their ROAS to break-even ROAS.
2. Scaling Decisions
Only ads consistently exceeding break-even should be scaled.
3. Budget Allocation
Winning ads get more spend; below-break-even ads get paused.
4. Bidding Strategy
Informs whether Bid Cap or Cost Cap targets are realistic or too aggressive.
Related terms: Bid Cap, Cost Cap
5. Funnel Strategy
Cold, warm, and hot audiences often have different break-even ROAS targets.
Impact of Break-even ROAS on Optimization
Break-even ROAS helps determine:
when to reduce spend
when to refresh creatives
when to restructure landing pages
when to adjust optimization events
which audiences to prioritize
It also prevents emotional decision-making during volatility.
When to Use Break-even ROAS
Use break-even ROAS when:
launching new products
running discount campaigns
scaling ad spend
evaluating creative winners
comparing performance across channels
calculating allowable CAC
reviewing campaign profitability
determining whether CPM increases are acceptable
Brands that measure break-even ROAS daily scale more confidently and sustainably.
Best Practices
1. Recalculate Break-even Every Time Margins Change
New COGS, shipping, or discounts shift everything.
2. Use Different Break-even ROAS for Each Funnel Stage
TOF, MOF, and BOF have different economics.
3. Don’t Scale Creatives Below Break-even
Even high CTR or high engagement creatives can be unprofitable.
4. Track Break-even Against 1-day & 7-day ROAS
Different attribution windows change profitability perception.
5. Adjust Offers to Influence Break-even
Better offers → higher conversion → lower break-even threshold.
Common Mistakes
Scaling campaigns without calculating break-even
Using a single break-even number for all funnels
Ignoring refunds or COGS inflation
Letting view-through ROAS distort true profitability
Assuming break-even ROAS stays constant
Not connecting break-even to Bid/Cost Cap strategy
Break-even ROAS is dynamic — never static.
Examples of Break-even ROAS in Action
Example 1: Low-margin brand
Margin = 20 percent
Break-even ROAS = 5.0
Any ROAS < 5.0 is unprofitable.
Example 2: High-margin brand
Margin = 60 percent
Break-even ROAS = 1.66
This brand can scale aggressively at lower ROAS.
Example 3: Discount sale
Margin drops → break-even ROAS increases → ad performance must adjust.
What to Learn After Break-even ROAS
(directly from your glossary list)
Bid Cap / Cost Cap (to set bidding constraints based on break-even)
Optimization Event (drives conversion patterns that impact ROAS)
Ad Delivery Optimization (improves efficiency and post-click ROAS)
