ROAS stands for Return on Ad Spend, and it’s a marketing metric that measures the revenue generated for every dollar spent on advertising. ROAS is calculated by dividing the revenue generated by an advertising campaign by the cost of the campaign. The resulting number is a ratio that indicates how much revenue is generated for each dollar spent on advertising.
How to calculate ROAS
ROAS = Revenue from Ad Campaign / Cost of Ad Campaign
For example, if you spend $1,000 on an advertising campaign and generate $5,000 in revenue from that campaign, the ROAS would be: 5
ROAS = $5,000 / $1,000 = 5
This means that for every dollar spent on the ad campaign, you generated $5 in revenue. ROAS is typically expressed as a ratio or percentage.
How to use ROAS and what does it tell you
ROAS is commonly used in online advertising campaigns, including Google Ads and Facebook Ads, and it’s a useful metric for measuring the performance of both e-commerce and lead generation campaigns. It’s a valuable metric because it helps you determine the effectiveness of your advertising campaigns and make informed decisions about where to allocate your advertising budgets. It’s also useful for comparing the performance of different advertising channels or campaigns. A higher ROAS indicates a more effective advertising campaign, while a lower ROAS may indicate that changes are needed to optimize the campaign for better results.