What is ROAS in SaaS?
Why 30-day ROAS measurements are misleading for subscription businesses—and what to track instead.
ROAS (Return on Ad Spend) is the revenue generated for every dollar spent on advertising. Formula: Revenue from ads / Ad spend. A 3:1 ROAS means you made $3 for every $1 spent.
For SaaS, ROAS is fundamentally different than e-commerce because revenue compounds over time. An e-commerce customer pays once—you know your ROAS immediately. A SaaS customer pays monthly for months or years. Do you calculate ROAS on month one ($100) or month twelve ($1,200)? Most companies measure the wrong number and make bad decisions.
I've seen founders celebrate a "3:1 ROAS" campaign, thinking they're profitable. They measure $3,000 in first-month payments against $1,000 ad spend. Looks great. But 70% of those customers churned within 90 days. True ROAS over 12 months? 0.9:1. They burned money while thinking they were winning.
This guide explains how to calculate ROAS correctly for SaaS, industry benchmarks by segment, and most importantly—how to improve ROAS without sacrificing customer quality. Because a 6:1 ROAS on customers who churn in month two is worse than a 3:1 ROAS on customers who stay for years.
The Problem with Measuring ROAS in Subscription Businesses
Google Ads campaign, month one: $5,000 spend, 100 paying customers at $80 each. Revenue: $8,000. ROAS: 1.6:1.
Looks mediocre. Maybe pause it and reallocate budget.
But those 100 customers average 16 months lifetime at $80/month. True lifetime revenue: $128,000. True ROAS: 25.6:1. That "mediocre" campaign is actually exceptional—you just measured it too early.
For SaaS, when you measure ROAS matters as much as how you measure it.
E-commerce has it easy: sell a $50 product, collect $50, calculate ROAS immediately. Done.
Subscriptions generate revenue over months or years. Measure at 30 days, you see a fraction of the value. Wait for full LTV, you can't make real-time decisions. The solution: track ROAS at multiple time horizons—30-day for tactical adjustments, 90-day for budget allocation, 12-month for strategic validation.
| Time Period | Revenue Recognized | Ad Spend | ROAS | Decision Impact |
|---|---|---|---|---|
| Month 1 | $8,000 | $5,000 | 1.6:1 | Looks marginal, might pause |
| Month 3 | $21,600 | $5,000 | 4.3:1 | Getting better, cautiously continue |
| Month 6 | $40,800 | $5,000 | 8.2:1 | Good, scale up spending |
| Month 12 | $76,800 | $5,000 | 15.4:1 | Excellent, aggressive scaling |
| Full LTV (16 mo avg) | $128,000 | $5,000 | 25.6:1 | World-class, maximum investment |
Same campaign, same customers, wildly different ROAS depending on when you measure it. If you only look at month one, you miss the full picture. If you wait for full LTV, you can't make real-time decisions. The solution is to use multiple time horizons: 30-day ROAS for tactical optimization, 90-day for budget decisions, and full LTV for strategic validation.
This is where sending LTV data back to ad platforms becomes critical. Instead of Google Ads seeing "$80 conversion," they see "$80 initially, then $80 month 2, $80 month 3..." and start optimizing for customers who generate that ongoing revenue stream, not just initial payment.
For SaaS, ROAS isn't a number—it's a curve that improves over time as customers keep paying.
How to Calculate ROAS for SaaS
Basic formula: Revenue ÷ Ad Spend.
For SaaS: choose which revenue to count and when to measure. Four methods, each useful for different decisions.
Use multiple methods. Single-number optimization leads to bad decisions.
30-day ROAS: tactical optimization, pause bad campaigns quickly. 90-day ROAS: monthly budget allocation. LTV-based ROAS: strategic channel investment decisions.
| Method | Revenue Counted | Best Use Case | Limitation |
|---|---|---|---|
| 30-Day ROAS | Revenue from customers in first 30 days | Tactical optimization, quick decisions | Understates true return |
| 90-Day ROAS | Revenue from customers in first 90 days | Budget allocation, monthly planning | Still not full picture |
| Cohort ROAS | Total revenue from customer cohort over time | Historical analysis | Requires 12+ months data |
| Predicted LTV ROAS | Estimated lifetime value per customer | Strategic decisions | Prediction accuracy varies |
Worked Examples
Let's calculate ROAS using each method for a real campaign.
Campaign: $3,000 ad spend → 50 customers at $49/mo
40 customers paid month 1, 35 still active month 3, 28 still active month 6
30-Day ROAS (Tactical)
Revenue: 40 customers × $49 = $1,960
ROAS = $1,960 / $3,000 = 0.65:1
Looks terrible. But this is too early to judge—80% of value hasn't been realized yet.
90-Day ROAS (Budgeting)
Month 1: 40 × $49 = $1,960
Month 2: 38 × $49 = $1,862
Month 3: 35 × $49 = $1,715
Total: $5,537
ROAS = $5,537 / $3,000 = 1.85:1
Getting better but still below target. Need 6 months to see true performance.
Predicted LTV ROAS (Strategic)
Average customer lifetime: 14 months
Expected LTV: 14 × $49 = $686
Expected total revenue: 50 × $686 = $34,300
ROAS = $34,300 / $3,000 = 11.4:1
This is the true return. But it takes time to realize. Use predicted LTV for strategic decisions, 90-day ROAS for monthly optimization.
Industry Benchmarks by Segment
ROAS varies by business model, pricing, and measurement timeframe.
These benchmarks assume 90-day measurement (industry standard for SaaS). Measuring at 30 days? Expect 50-60% of these numbers. Measuring full LTV? Expect 2-4x depending on customer lifetime.
| Segment | 90-Day ROAS | 12-Mo ROAS | Full LTV ROAS | Key Factor |
|---|---|---|---|---|
| SMB Self-Serve | 1.5-2.5:1 | 3.5-5:1 | 4-7:1 | High churn limits LTV |
| Mid-Market | 2-3.5:1 | 5-8:1 | 8-15:1 | Longer lifetime |
| Enterprise | 3-5:1 | 8-12:1 | 15-25:1 | Annual contracts |
Notice how ROAS compounds over time—what looks mediocre at 90 days becomes excellent at 12 months. This is why pausing campaigns based on early ROAS is dangerous. You might kill your best campaigns before they mature.
The gap between 90-day and full LTV ROAS also reveals how important retention is. A 2x gap suggests high churn (SMB). A 5-8x gap suggests excellent retention (enterprise with multi-year contracts). If your gap is smaller than expected for your segment, focus on reducing churn before scaling spend.
ROAS and Other Key Metrics
ROAS is part of a larger unit economics picture. It doesn't exist in isolation—it interacts with CAC, LTV, churn rate, conversion rate, and payback period. Understanding these relationships prevents the mistake of optimizing ROAS while accidentally destroying overall profitability.
| Metric | Impact on ROAS | Example |
|---|---|---|
| Churn Rate % leaving monthly | Lower churn = higher LTV = better long-term ROAS | Reducing churn 5→3% increases 12-mo ROAS by 40% |
| Trial→Paid Rate Conversion rate | Higher conversion = more customers per ad spend | Doubling conversion 15→30% doubles ROAS immediately |
| CAC Cost per customer | ROAS = LTV / CAC (inversely related) | Cutting CAC $200→$150 improves ROAS by 33% |
| Pricing Monthly/annual rates | Higher price = higher revenue per customer | Price increase $49→$59 improves ROAS by 20% |
| Time to Value Activation speed | Faster activation = earlier revenue recognition | Improving TTV improves 30-day ROAS, not full LTV |
The most common trap: improving 30-day ROAS by cutting prices or offering aggressive discounts. Yes, more people convert. Yes, 30-day ROAS looks amazing. But LTV collapses because you trained customers to expect discounts and attracted price-sensitive buyers who churn fast. Your 90-day and 12-month ROAS end up worse.
Better approach: improve ROAS by fixing onboarding (higher trial→paid conversion) and reducing churn (higher LTV). Both improve ROAS at all time horizons without compromising customer quality or unit economics.
The best ROAS improvements come from getting more value from existing ad spend, not from spending less or discounting more.
Learn more about optimizing LTV and reducing CAC sustainably.
Sustainable ROAS Improvement Strategies
Two paths to improve ROAS: increase revenue per customer, or decrease cost per customer.
Most companies focus on the second one—cutting ad spend, lowering bids—because it shows immediate results. It also brings worse customers who churn faster.
The sustainable path increases revenue per customer without compromising quality.
Better onboarding improves trial-to-paid conversion. Lower churn extends customer lifetime. Both improve ROAS at all time horizons without attracting price-sensitive customers who leave quickly.
| Strategy | How It Helps | Typical Impact | Time to See Results |
|---|---|---|---|
| Send LTV Data to Platforms | Algorithms learn to find valuable customers | +35-65% ROAS | 8-12 weeks |
| Improve Onboarding | Higher trial→paid = more revenue per dollar | +25-50% ROAS | 2-4 weeks |
| Reduce Early Churn | Customers stay longer = higher LTV | +30-60% ROAS | 3-6 months |
| Better Ad Creative | Higher CTR/CVR = lower CPA | +15-30% ROAS | 1-2 weeks |
| Audience Refinement | Target customers who convert and stay | +20-40% ROAS | 4-8 weeks |
Highest-impact strategy: sending LTV data to ad platforms via server-side tracking.
Most companies skip it because it requires technical implementation. But it's the only strategy that improves ROAS automatically as algorithms learn. Everything else needs continuous manual effort.
Example: company started sending renewal data to Google Ads. Week 1: no change. Week 6: campaigns favoring audiences with better 90-day retention. Week 12: 90-day ROAS improved from 2.1:1 to 3.4:1. Same spend, 62% better return. This transformation is why Google Ads for SaaS requires different optimization than e-commerce campaigns.
Teach platforms to find customers who stay, not just customers who sign up. Whether working with a specialized PPC agency or managing campaigns yourself, LTV data is the foundation.
Tracking ROAS Accurately
Most companies calculate ROAS in spreadsheets: pull ad spend from platform dashboards, pull revenue from Stripe, divide. This works for blended ROAS but breaks down when you need to answer "Which campaigns drive customers with high LTV?" or "Does Google or Meta have better 12-month ROAS?"
The problem: your ad platforms see conversions (signups, trials). Your billing system sees payments. Without connecting them, you can't measure channel-specific ROAS over time. You don't know if the Meta campaign that drove 100 signups resulted in customers who paid for 2 months or 20 months.
Accurate ROAS tracking requires matching customers back to their original ad click (via gclid, fbclid, ttclid) and sending subscription events to the platform. When someone renews in month 6, Google Ads needs to know "this $49 payment came from that ad click from 6 months ago." Otherwise they optimize for cheap signups instead of valuable customers.
What Changes With LTV Tracking
- •30-Day ROAS: Might stay flat or dip initially as algorithms stop chasing quick conversions
- •90-Day ROAS: Typically improves 35-65% within 8-12 weeks as better customers come through
- •12-Month ROAS: Often 2-3x better than campaigns without LTV tracking
- •Campaign Decisions: Stop pausing campaigns that look expensive but bring customers who stay
Most companies either build this infrastructure (2-4 weeks engineering time) or use a platform that handles it. The build vs buy decision depends on engineering resources and how important paid acquisition is to growth.
For implementation details, see our guide on how server-side LTV tracking works.
Why Early ROAS Measurements Kill Winning Campaigns
Standard workflow: pull ad spend from platform dashboards, revenue from Stripe, calculate ratio at 30 days.
1.2:1 ROAS after 30 days. Looks weak. Campaign gets paused.
Three months later, someone checks those customers. 70% still active, average LTV $680. Real ROAS: 8.5:1. Best-performing campaign, killed by measuring too early.
The inverse problem: campaigns that look great at 30 days but collapse by month six.
4:1 ROAS in the first month. Celebrate, scale from $2k to $10k/month. Six months later: massive churn. True 12-month ROAS: 0.9:1. You burned $48,000 optimizing for a metric that didn't predict retention.
The fix: connect your billing system to ad platforms using server-side tracking. When someone renews in month 6, Google Ads knows that renewal came from their campaign. Algorithms learn to find customers who stay.
Track ROAS at multiple time horizons. Make decisions on 90-day data. Send subscription events so platforms optimize for retention.
See how to implement this in 5 minutes without building it yourself.
Related Resources
What is LTV in SaaS?
Learn how to calculate Customer Lifetime Value. ROAS should be measured against LTV, not just initial payments.
What is CAC in SaaS?
Understand Customer Acquisition Cost. ROAS and CAC are inverse metrics—both essential for unit economics.
Server-Side Tracking Guide
Technical guide on implementing server-side tracking to improve ROAS by 35-65%.
Free LTV Calculator
Calculate expected LTV to set proper ROAS targets for your ad campaigns.
Improve ROAS by 35-65% Automatically
Send subscription LTV data to ad platforms. Their algorithms learn which customers stay and pay. Your ROAS improves automatically.