Target ROAS is a Google Ads Smart Bidding setting where you tell Google how much conversion value you want back for each pound you spend, as a percentage, and Google bids in each auction to bring in as much value as it can at around that return. A target of 400% asks for £4 of tracked conversion value for every £1 of ad spend. In the current interface it appears as Maximise conversion value with an optional target ROAS.
How target ROAS works
The strategy needs a conversion value attached to each conversion. For a shop that is usually the order value passed by the purchase tag; for a lead business it is a value you assign, ideally different for different kinds of lead. Google predicts, auction by auction, both how likely a click is to convert and how much that conversion is likely to be worth, and bids accordingly.
Like target CPA, it works on an average. Some days and some products will return less than the target and others more. Raising the target makes the campaign more selective, so it usually spends less and brings fewer sales; lowering it lets the campaign chase more volume at a lower return. It is available in campaign types including Search, Shopping and Performance Max, and the general measure is explained under return on ad spend.
Why it matters
When orders vary in value, counting each one equally misleads the bidding. A homeware shop that sells £12 candles and £600 sofas should not bid the same for both kinds of buyer. Target ROAS lets the system put more money behind the searches likely to produce larger baskets.
For UK businesses the target only makes sense once you know what the revenue figure includes. Many shop platforms send the order value including VAT and delivery. At the standard 20% VAT rate, a 400% ROAS measured on VAT-inclusive revenue is about 333% on the revenue you actually keep. Your break-even point depends on gross margin: with a 40% margin you need £2.50 of net revenue per £1 spent, a 250% ROAS, just to cover the cost of goods and the ads. Returns matter too, since online buyers have a 14-day right to cancel under the Consumer Contracts Regulations. Many shops use profit on ad spend for the same reason.
Common mistakes
- Choosing the target from what you would like rather than from your margin and current performance.
- Mixing VAT-inclusive and VAT-exclusive values, so the reported ROAS cannot be compared with your accounts.
- Duplicate purchase tracking, such as a confirmation page that fires again on refresh, which inflates value and makes the target look easy.
- Setting the target far above what the campaign currently achieves, which starves it of spend.
- Ignoring returns in categories such as fashion, where a large share of revenue can come back.
How to act on it
Work out break-even ROAS from your margin, with VAT and delivery handled consistently; the ROAS calculator does the arithmetic. Set the first target close to what the campaign has achieved over the last few weeks, then move it in steps of a few percentage points, waiting long enough for sales to catch up between changes.
If some products or customers are worth more than their order value suggests, conversion value rules or margin-based values can teach the bidding that difference. Setting targets that match your actual margins is a large part of my work on Performance Max for online shops.