Etsy Ads ROI Calculator
Etsy Ads is a daily budget model, so the only number that matters is revenue per dollar spent.
ROAS is not profit
A 3x ROAS sounds good until you remember the product cost. If your margin before ads is 40%, a 3x ROAS leaves you with 120% of ad spend in gross margin, so you are profitable but only barely.
The break-even ROAS is 1 divided by your margin percentage. At a 40% margin, you need 2.5x just to break even.
A worked example
You spend $100 on Etsy Ads in a month and the ads bring in $300 of revenue. That is a 3.0x ROAS, which sounds healthy.
Now apply the margin. If your product margin before ads is 40%, that $300 of revenue carries $120 of gross margin. Subtract the $100 of ad spend and you are left with $20. A 3x ROAS produced $20 of profit on $100 of risk.
The break-even ROAS at a 40% margin is 1 / 0.40 = 2.5x. So this campaign is profitable, but by a margin of 0.5x. If the margin were 30%, break-even ROAS would be 3.33x and the same campaign would be losing money.
What ROAS does not show
ROAS measures revenue, not cash. Three things sit between the two.
Returns and refunds. Ad revenue counts at the moment of sale. If 8% of those orders come back, the effective ROAS falls by roughly 8%, and the platform fee is not always returned with it.
Cannibalised organic sales. Some of the people who clicked the ad would have found you anyway. Those sales are counted as ad revenue but they are not incremental. The only honest test is to pause ads for a period and compare total revenue, not ad revenue.
The fixed part of the fee. On a $12 item, a $0.30 payment fee is 2.5% of revenue before any ad spend is counted. Low-ticket catalogues need a higher ROAS to reach the same profit.
Raising the budget
Incremental ROAS almost always declines as spend rises: Etsy serves the cheapest, most relevant impressions first. The rule that keeps this honest is to raise the budget in steps and compare the new ROAS against break-even, not against the previous ROAS. If the last $50 of spend came in at 1.8x against a 2.5x break-even, the extra budget is buying revenue at a loss.
FAQ
- What is a good ROAS on Etsy?
- Above 1/margin. At a 40% margin that means above 2.5x.
- How does Etsy Ads billing work?
- You set a daily budget and Etsy spends up to that amount, charging per click.
- Should I turn ads off in slow months?
- Only if the ROAS is below break-even for several consecutive weeks.