Ideal ROAS: what it is, how to calculate it, and what ROAS you need on Mercado Livre and Shopee

ROAS is revenue generated by the listing ÷ ad spend. There’s no universal ideal ROAS; it depends on your margin. Your break-even ROAS is 1 ÷ margin before ad spend: at a 25% margin, it’s 4; at 15%, it’s 6.7. And profit after ad spend comes down to one formula: profit = revenue × (margin − 1 ÷ ROAS). With R$ 10 mil in sales, a 25% margin, and a ROAS of 5, you’re left with R$ 500. At a ROAS of 4, you break even.

Mercado Livre replaced target ACOS with target ROAS in campaigns in January 2026, and Shopee measures Shopee Ads in ROAS. The number is more visible now; the margin is still hidden. Here’s how to connect the two.

#How to calculate ROAS

ROAS = revenue from sales attributed to the listing ÷ ad spend

R$ 10.000 in sales with R$ 2.500 in ad spend gives you a ROAS of 4. The same data in ACOS: R$ 2.500 ÷ R$ 10.000 = 25%.

A higher ROAS means greater efficiency. But efficiency isn’t profit.

#Each product’s break-even ROAS

Every sale from an ad carries an ad cost. If a product’s margin before ad spend is M, the ad breaks even when ACOS equals M—in other words, when ROAS is 1 ÷ M.

Margin before ad spend is the price minus commission, shipping (or a fixed fee), tax, product cost, and packaging, divided by the price. I explain how to calculate it in profit margin: how to calculate it.

To keep a profit of L after ad spend, the minimum ROAS is 1 ÷ (M − L). If your margin is 10% and you want a 10% profit, no ROAS can get you there: the product can’t support ad spend.

#The formula for profit after ad spend

Profit = revenue × (margin − 1 ÷ ROAS)

With R$ 10.000 in sales from ads and a 25% margin:

Notice that a ROAS of 3 looks reasonable on a dashboard—"every real brings in three"—but loses R$ 833 on this product.

#Four mistakes that hide losses behind a good ROAS

1. Using the campaign average. A campaign with a ROAS of 6 can mix products with 40% margins (great) and 12% margins (unprofitable). Check ROAS by product, using each product’s margin.

2. Counting indirect sales. The dashboard counts not only the product clicked, but also other products bought after the click (on Shopee, up to 7 days later). These sales may have different margins. When deciding whether to keep a listing, use direct ROAS.

3. Forgetting your real margin. If your calculation leaves out shipping or tax, your break-even ROAS will be lower than it should be, making an unprofitable listing look profitable.

4. Ignoring TACOS. ROAS measures only sales from ads. TACOS (ad spend ÷ total revenue) shows how much of your total revenue goes to advertising. A steady ROAS with rising TACOS means ads are taking the place of organic sales. I wrote about this in Good ACOS, bad profit.

In practice. A cosmetics store used a ROAS of 5 as the target for every product because "that’s what the market considered good." When they ran the numbers by product, lipsticks and nail polish, with margins between 14% and 18%, had break-even ROAS values between 5.6 and 7.1. At a ROAS of 5, every ad-driven sale of those products lost money. Perfumes, with a 38% margin, broke even at a ROAS of 2.6 but had limited budgets. Replacing one target with targets by margin group increased profit without changing total ad spend.

#How to set a ROAS target for each product

1. Calculate each product’s margin before ad spend using the channel’s actual fees.
2. Set the minimum profit you want after ad spend (5%, 8%, 10%).
3. Minimum ROAS = 1 ÷ (margin − minimum profit).
4. Group products by minimum ROAS range and create one campaign for each group.
5. Don’t advertise products with a minimum ROAS above 15.

On Mercado Livre, this target becomes the campaign’s target ROAS for manual campaigns: Mercado Livre Ads in 2026. On Shopee, use it to decide whether to keep or pause each listing: Shopee Ads: how it works.

#ROAS and margin in one place

The ads dashboard shows ROAS without margin; the margin spreadsheet doesn’t show ROAS. Milewa brings them together: it calculates each product’s real margin before ad spend, including fees charged by Mercado Livre and Shopee, product cost, and tax. It then applies each product’s ad spend and shows profit after ad spend by product. Products with a great-looking ROAS but negative profit appear on the list, along with the ROAS they need to break even.