Marginal ROAS Explained Simply

Blended ROAS can be deceiving.

Your overall ROAS might be 250%, but that doesn't mean every dollar you spend generates 2.5x return.

The first $10K you spend might deliver 350% ROAS. The next $5K might deliver 100% ROAS. Blended, you see 250% and think everything is great.

But if you keep scaling, that next $5K could deliver 50% ROAS—and you'd be losing money on incremental spend while your blended number still looks healthy.

This is why marginal ROAS matters.

What is Marginal ROAS?

Marginal ROAS is the return on ad spend from incremental spending only.

It answers the question: "If I spend $1 more, how much revenue will that $1 generate?"

Formula:

Marginal ROAS = (New Revenue - Baseline Revenue) / (New Spend - Baseline Spend)

Example:

• Baseline: $10K spend → $25K revenue (250% ROAS)
• After scaling: $15K spend → $31K revenue (207% ROAS)

Blended ROAS dropped from 250% to 207%, which looks bad.

But let's calculate marginal ROAS:

• Incremental spend: $15K - $10K = $5K
• Incremental revenue: $31K - $25K = $6K
• Marginal ROAS: $6K / $5K = 120%

The extra $5K delivered 120% ROAS. If your breakeven is 100%, this is still profitable.

Why Marginal ROAS Matters More Than Blended ROAS

Blended ROAS Hides Inefficiency

Blended ROAS averages your best-performing and worst-performing spend.

Example:

Spend Level	Incremental Spend	Incremental Revenue	Marginal ROAS	Blended ROAS
$5K	$5K	$20K	400%	400%
$10K	$5K	$15K	300%	350%
$15K	$5K	$10K	200%	300%
$20K	$5K	$5K	100%	250%
$25K	$5K	$2.5K	50%	210%

At $25K spend, blended ROAS is still 210%—looks great.

But the last $5K delivered only 50% ROAS. You're losing money on that incremental spend.

Marginal ROAS Tells You When to Stop Scaling

You should scale until marginal ROAS equals your breakeven threshold.

If your breakeven ROAS is 100%:

• Marginal ROAS at $15K spend: 150% → Keep scaling
• Marginal ROAS at $20K spend: 110% → Keep scaling
• Marginal ROAS at $25K spend: 90% → Stop scaling

At $25K, every additional dollar loses money.

How to Calculate Marginal ROAS

Step 1: Establish Your Baseline

Pick a recent period where spend was stable.

Example:

• Week 1: $10K spend, $28K revenue
• Baseline ROAS: 280%

Step 2: Increase Spend

Scale gradually (20-30% increments).

Example:

• Week 2: $12K spend, $32K revenue

Step 3: Calculate Marginal ROAS

Marginal ROAS = (New Revenue - Baseline Revenue) / (New Spend - Baseline Spend)

Example:

• Incremental spend: $12K - $10K = $2K
• Incremental revenue: $32K - $28K = $4K
• Marginal ROAS: $4K / $2K = 200%

The extra $2K delivered 200% ROAS.

Step 4: Compare to Breakeven Threshold

If breakeven ROAS is 100%, marginal ROAS of 200% means the incremental spend is profitable.

Decision: Continue scaling.

Step 5: Repeat Until Marginal ROAS Hits Breakeven

Keep scaling in increments and calculating marginal ROAS. Stop when marginal ROAS drops to your threshold.

Marginal ROAS in Practice

Scenario 1: Gaming App (Ad-Monetized)

Baseline:

• $5K/day spend
• $12K/day revenue
• Blended ROAS: 240%
• Breakeven ROAS: 120%

Test 1: Scale to $7.5K/day

• Revenue: $16K/day
• Incremental spend: $2.5K
• Incremental revenue: $4K
• Marginal ROAS: $4K / $2.5K = 160%

Result: 160% > 120% breakeven. Keep scaling.

Test 2: Scale to $10K/day

• Revenue: $19K/day
• Incremental spend: $2.5K
• Incremental revenue: $3K
• Marginal ROAS: $3K / $2.5K = 120%

Result: 120% = breakeven. At the limit. Monitor closely.

Test 3: Scale to $12.5K/day

• Revenue: $21K/day
• Incremental spend: $2.5K
• Incremental revenue: $2K
• Marginal ROAS: $2K / $2.5K = 80%

Result: 80% < 120% breakeven. Stop scaling. Pull back to $10K/day.

Scenario 2: Subscription App

Baseline:

• $8K/day spend
• $10K/day Day 30 revenue
• Blended ROAS: 125%
• Breakeven ROAS: 100%

Test 1: Scale to $12K/day

• Day 30 revenue: $13.5K/day
• Incremental spend: $4K
• Incremental revenue: $3.5K
• Marginal ROAS: $3.5K / $4K = 87.5%

Result: 87.5% < 100% breakeven. Stop. Don't scale further.

Decision: Improve monetization (increase trial-to-paid conversion) before scaling.

Why Marginal ROAS Declines When You Scale

Reason 1: Audience Saturation

Your first $5K targets your most relevant audience. Your next $5K expands to less relevant users.

Result: Lower conversion rates, higher CPA, lower marginal ROAS.

Reason 2: Creative Fatigue

When you show the same ads more frequently, performance degrades.

Result: Lower CTR, higher CPI, lower marginal ROAS.

Reason 3: Auction Competition

As you increase spend, you're bidding more aggressively, which can drive up costs.

Result: Higher CPI, lower marginal ROAS.

Reason 4: Platform Algorithm Inefficiency

Platforms optimize for your current spend level. Rapid scaling forces them to find new users quickly, which lowers targeting precision.

Result: Lower user quality, lower marginal ROAS.

How to Improve Marginal ROAS

Strategy 1: Add Fresh Creative

New creative prevents fatigue and reaches new audiences.

Impact: Can improve marginal ROAS by 20-40%.

Strategy 2: Expand Targeting Gradually

Move from 1% lookalikes to 2% to 5%. Test new interest groups.

Impact: Expands addressable audience without crashing marginal ROAS.

Strategy 3: Diversify Across Channels

Instead of scaling vertically (one channel), scale horizontally (multiple channels).

Example:

• Spending $20K/day on Meta alone → Marginal ROAS drops to 90%
• Spending $12K on Meta + $8K on Google → Marginal ROAS stays at 140%

Strategy 4: Optimize for Value, Not Volume

Switch from install optimization to value optimization (purchases, subscriptions).

Impact: Platforms find higher-LTV users, which improves marginal ROAS.

Strategy 5: Improve Product Monetization

Better onboarding, pricing, and retention increase revenue per user, which lifts marginal ROAS.

Example:

• Increase trial-to-paid conversion from 25% to 35%
• ARPU increases 40%
• Marginal ROAS improves even at the same CPI

Blended ROAS vs Marginal ROAS: When to Use Each

Use Blended ROAS for:

• Overall campaign health checks
• Comparing performance across channels
• Reporting to stakeholders

Use Marginal ROAS for:

• Scaling decisions
• Budget allocation between channels
• Determining max sustainable spend

Example:

You have two channels:

• Meta: $10K/day, 180% blended ROAS, 120% marginal ROAS
• Google: $5K/day, 160% blended ROAS, 200% marginal ROAS

Blended ROAS says: Meta is better (180% vs 160%).

Marginal ROAS says: Google has more room to scale (200% vs 120%).

Decision: Shift budget from Meta to Google to maximize total profitability.

Common Marginal ROAS Mistakes

Mistake 1: Only Looking at Blended ROAS

If you only track blended ROAS, you won't know when you've hit the scaling ceiling.

Fix: Calculate marginal ROAS weekly when scaling.

Mistake 2: Scaling Too Fast to Measure Marginal ROAS

If you double spend overnight, you can't isolate the impact of incremental spend.

Fix: Scale in 20-30% increments. Wait 3-5 days between increases to measure marginal impact.

Mistake 3: Not Setting a Breakeven Threshold

If you don't know your breakeven ROAS, you don't know when to stop scaling.

Fix: Calculate breakeven ROAS = 1 / (1 - Cost %). Use this as your marginal ROAS floor.

Mistake 4: Ignoring Channel-Specific Marginal ROAS

Each channel has a different marginal ROAS curve. Don't use a blended threshold.

Fix: Track marginal ROAS separately for Meta, Google, TikTok, ASA.

Key Takeaways

• Marginal ROAS measures return on incremental spend, not total spend
• Scale until marginal ROAS equals your breakeven threshold, then stop
• Blended ROAS can look healthy while marginal ROAS is negative
• Calculate marginal ROAS by comparing incremental revenue to incremental spend
• Improve marginal ROAS with fresh creative, gradual targeting expansion, and channel diversification

FAQs

What is marginal ROAS?

Marginal ROAS is the return on ad spend from incremental spending only, not your total spend. If you scale from $10K to $15K/day and the extra $5K generates $8K in revenue, your marginal ROAS is 160% ($8K / $5K).

Why is marginal ROAS important?

Marginal ROAS tells you if the next dollar you spend will be profitable. Blended ROAS can look healthy while marginal ROAS is negative. You should scale until marginal ROAS equals your breakeven threshold, then stop.

How do you calculate marginal ROAS?

Marginal ROAS = (New Revenue - Baseline Revenue) / (New Spend - Baseline Spend). Example: Baseline is $10K spend generating $25K revenue. You increase to $15K spend generating $31K revenue. Marginal ROAS = ($31K - $25K) / ($15K - $10K) = 120%.

What's a good marginal ROAS?

Marginal ROAS should exceed your breakeven ROAS. If breakeven is 100%, target marginal ROAS of 120-150%+ to maintain profitability while scaling. Stop scaling when marginal ROAS drops below breakeven.

Can marginal ROAS be higher than blended ROAS?

Yes, early in your scaling curve. If your baseline ROAS is 200% and marginal ROAS is 250%, your initial targeting was conservative. You have room to scale aggressively. This is rare but indicates strong opportunity.

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Marginal ROAS is the metric that separates smart scalers from those who burn budget. Track it closely, and you'll always know your true growth ceiling.