What is ROAS?

Marketing Acronyms: What's ROAS?

 ROAS = Return On Ad Spend

Return on Ad Spend is a simple way to assess the success of your ad campaigns. The formula is as follows:

Revenue / Cost = ROAS

Basically, if you earn $2000 from an ad campaign and you spent $1000 your ROAS = 2

It is important to have a valid metric for measuring your ad spend (that’s pretty easy) and the revenue generated (that’s much harder)

A couple of things you should keep in mind when tracking your ROAS on a campaign. 

  • This is a metric commonly associated with paid ads such as Google Adwords. For example, the average ROAS on marketing is $2.87 for every $1.00 spent.

  • ROAS is not the same as ROI - If you spent $1 to earn $5 your ROI is $4 or 4:1

  • ROAS doesn’t determine the profitability of a campaign - for example, if you spent $1000 on ads and generate $3000 in revenue - but your product, shipping and overhead costs you $2,000, you have an ROAS of 3:1 but you’ve broken even in terms of profit.

  • ROAS is generally easier to track from ecommerce sales than when selling services - just because you need to track your leads, lead sources, when the lead converts to a sale, etc.

  • Many times only the immediate transaction is considered when tracking ROAS - not the follow on sales and revenue that occur when a customer returns to purchase again.

To sum it up, ROAS is a solid but somewhat general metric to track. It’s best to know your profit margins and goals when using this metric to measure success.

Hope that was helpful!

Mark Kelly



Have questions about marketing for your business? Schedule a call with Mark