The Plain English Guide to Return on Ad Spend (ROAS)

As much as we wish marketing could be all creatives and content writing, analyzing data and calculating the effectiveness of a campaign is equally important. One of those calculations includes ROAS, or Return on Ad Spend! In this article, we’ll take a look at what ROAS really is, what makes it different from ROI, and how you can calculate it.?

What is ROAS?

ROAS (return on ad spend) is a metric which measures the revenue that's generated compared to every dollar of an advertising campaign. For example, let's say you made $10 for every $1 spent on an advertising campaign. That means your ROAS for that campaign is 10:1.

Ultimately, ad spend is meant to measure the effectiveness of a specific ad campaign, not your overall ROI -- more on that below.

Besides ROAS, you'll most likely measure other metrics such as click-through rate and ROI. By measuring multiple metrics, you'll get a more accurate view of your results.

Of course, measuring performance and tracking analytics is an important part of any marketing campaign.

By tracking performance, you can improve and iterate on your marketing techniques. Plus, data is one of the only ways to truly prove that your department brings in revenue, which is incredibly important.

When you're analyzing any data, it's important to consider context and review qualitative data as well as quantitative data.

ROAS vs. ROI

While return on investment (ROI) measures the total return of an overall investment, return on ad spend (ROAS) only calculates your return in regard to a specific ad campaign. Essentially, ROI is a bigger picture metric, while ROAS is a specific metric measuring the success of a specific ad campaign.

Ultimately, this means that the only cost considered in a ROAS calculation is the cost of advertising. On the other hand, the cost of an entire project or campaign will be considered in an ROI calculation.

How to Calculate ROAS

The equation to calculate ROAS is simple: Revenue Generated by Ads / Cost of Ads. With this equation, you'll get a ratio that can help you determine whether your ad campaign is working.

While the equation is simple, you might face difficulty gathering the data needed to run this calculation. For instance, calculating the cost of an ad isn't always easy. You'll need to consider the cost of the ad bid, the labor cost for the time it took to create the creative assets, vendor costs, and affiliate commissions.

But it's important to get an accurate estimate of the actual money spent on an ad to get an accurate ROAS measurement. If your data isn't accurate, your findings won't be either.

While ROAS is an important metric to keep track of in your marketing efforts, it shouldn’t be the only metric you monitor. Always take into account your other metrics results, and look at the full picture for your Return on Investment.?

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