Paid search is difficult to scale profitably.
Paid search—especially Google Ads—is often seen as a mandatory strategy for e-commerce growth. But with rising CPCs and more competition, it’s more important to let the profitability math guide your funding decisions. Before ramping up your ad budget, it pays to get clear on realistic ROAS benchmarks and what truly makes paid search profitable for your store.
What’s a “typical” ROAS in e-commerce right now?
ROAS, or Return on Ad Spend, is how many dollars you get back in sales for every dollar you spend on ads.
- The average e-commerce ROAS across platforms tends to be just under 3:1. Or, less than $3.00 in revenue per $1 spent.
- A more “healthy” baseline ROAS target for many brands is 4:1 or higher—keeping you safely above variable costs and overhead.
While this benchmark helps you understand what’s happening in the market, ultimately the only thing that counts is your own profitability.
Fast formula: Breakeven Calculations
We’re going to do the math, but don’t worry, it’s pretty straightforward. Let’s start by defining our terms.
- Gross Margin (GM%) = (Revenue – Cost of Goods Sold) ÷ Revenue
- Breakeven ROAS = 1 ÷ GM
If you have an average ROAS of 3:1 then you’ll need a gross margin percentage of at least 33% in order to break even. If you move that 4:1, you only need 25% and so on.
But no one is happy about breaking even. We need to ensure that the ROAS is well above breakeven.
Let’s reverse engineer this and try to calculate the maximum CPC you can afford to spend. First you’ll need some key numbers from your business:
- CVR = Conversion Rate = Orders ÷ Page Traffic
- AOV = Average Order Value = Revenue ÷ Orders
- GM% = Gross margin percent
The breakeven CPC simply requires you to multiply all three together. Let’s use some industry averages for an example:
- AOV = $150
- GM = 35%
- CVR = 5%
The formula is Max CPC = AOV × GM × CVR. In our example, the Max CPC is $150 × .35 × .05 = $2.63 for a breakeven ROAS of 2.9. While your numbers may be different and you may see different results from different advertising strategies, the basic math stands.
When paid search does make sense—and how to amplify ROI
Paid search can still be very profitable, but only when the math works.
- Increase GM%: Raise prices, spend more on more expensive products, negotiate supplier terms. Even a modest GM% improvement can have a significant impact on your breakeven ROAS.
- Lift CVR: Overcome objections, answer common questions, incorporate more product attributes, and include plenty of pictures and videos. Even a small improvement in CVR can have a big impact on the math.
- Raise AOV: Cross-sells, upsells, free-shipping thresholds. Do whatever it takes to move that average order value up.
- Reduce CPC: Google respects a quality landing page, and the same steps you take to lift the CVR could.
- Organic Traffic: While not strictly a paid search strategy, ultimately, the more real estate you own on the search results page should improve overall profitability. By some measures 94% of clicks go to the organic listings, and thus it rarely makes sense to do paid search without at least some organic investment.
What’s a “good” ROAS in 2025?
While some are thrilled with a 4-6:1 ROAS, ultimately, there are other digital strategies that can deliver higher returns. Investing in original product content can generate return on content spend (ROCS) that can be significantly higher while also improving ROAS.