Return on Ad Spend (ROAS)

ROAS is a popular metric in digital marketing and eCommerce marketing as a standard measure for its effectiveness. The step of ROAS will inevitably teach you how to create a successful Adwords campaign without a need for a Google Ads Specialist. ROAS is an abbreviation for “Return On Ad Spend,” and it is calculated only by the division of the revenue obtained by a campaign to the spend;

 

ROAS = Revenue/Spend.

 

ROAS is fundamentally different than other ‘return-on-investment’ (ROI) metrics because marketing is not a similar investment. Instead of money spent on future advertising technology or inventories (CAPEX), marketing spend is ‘risked’ and typically considered OPEX.

 

High ROAS is not directly related to profitability as it does not account for the cost of goods sold or other related company expenses. However, because of its simplicity, ROAS provides an excellent measure for the success of a paid advertisement campaign and other future advertising technology.

 

ROAS is expressed wither as a ratio or in percent, namely if the ad-spend is a $1,000 and resulting revenue is $5,000 the ROAS will read either $5:1 or 500% where both terminologies are accepted in the industry and mean that you generated $5 of revenue for every $1 spent.

 

ROAS, in itself, does not indicate the economic value; therefore, it is usually considered a management figure that, once more significant than 1 (or 100%), should lead to a review of the ROI figures. Learning how to create a successful Adwords campaign through ROAS metrics proves to be a useful tool for eCommerce automated advertising companies and future advertising technology without any need for a Google Ads specialist.

 

Related Readings

Corporate Finance Institute® (CFI), ROAS, A measure of the revenue generated per dollar of marketing spend.
Bigcommerce, What is ROAS? Calculating Return On Ad Spend
VerticalRail ROAS CALCULATOR
Disruptive Advertising What is ROAS?

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