Free guide to improve profit margins for online stores. 🚀 Read now

ROAS

Updated on

ROAS is a metric that measures the amount of Revenue your business earns for each dollar it spends on advertising.


What does ROAS mean ?

ROAS stands for return on ad spend and it is an important key performance indicator in paid online marketing. Similar to return on investment (ROI) it shows the profit achieved for each advertising expense and can be measured ROI of money invested into digital advertising.

It is a key metric for measuring and setting up strategic success in mobile advertising. It can be measured in detail based on specific ads, targeting, and so on.

How to calculate ROAS ?

Calculating ROAS is a simple formula:

ROAS = (revenue attributable to ads / cost of ads) * 100

For example, if you invest $100 into your ad campaign and generate $300 in revenue from those ads you run, So your ROAS is 3 which is a very good result for your campaign.

There are several ways to determine the cost of your ads. Calculating ROAS becomes a little bit more complicated when determining what the cost of ads is, and there are a couple of decisions to be made.

If you want to know how much particular ads will cost, then you have to choose and track any one platform. you may want to include additional advertising costs such as Vendor costs or Team costs.

Uses

ROAS might be more helpful than ROI in optimizing for short-term or very specific strategies for marketing. ROAS is very useful for mobile marketing when you’re tracking multiple campaigns and ad platforms.

FAQ

Q. How does ROAS vs ROI work?

Ans. ROI can help you understand the long-term profitability of your business and ROAS helps you for optimizing short-term strategy.

Q. What is a good ROAS?

Ans. It depends on several factors but the average ROAS is 2:1, $2 in revenue to $1 in ad costs.