Understanding Return on Ad Spend (ROAS)

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The ROAS is a single metric that can be used to measure the effectiveness of your digital marketing investment. It is also an essential tool for measuring the success of your overall marketing strategy. Here is an insight into what ROAS is and how it works.

What is the return on ad spend (ROAS)?

What is ROAS, exactly? It measures the revenue your ads generate for every dollar spent. The higher your ROAS, the better it is for business. ROAS in full stands for return on ad spend.

How does return on ad spend (ROAS) work?

To calculate the ROAS, you need to divide the total revenue from a campaign or channel by its cost, then multiply that number by 100 to get a percentage result. For example, if you spent $100 and made $300 in sales for a ROAS of 300%, your ad was worth every dollar.

It’s important to remember that ROAS is a relative measurement, not an absolute one like total revenue or total sales. What makes it useful for marketers and ad buyers is precisely what differentiates it from other metrics. You can use it to compare the performance of ads across channels and campaigns regardless of their initial investment.

How do you use return on ad spend (ROAS)?

As a digital marketer, consider using ROAS to help assess the performance of your ads and campaigns in relation to each other. ROAS can compare the success of different channels across marketing campaigns and strategies by taking their initial investment out of the equation entirely. Instead, focus on the ROAS of individual ads within your campaigns to see which are driving sales and then use that information to inform future marketing strategies.

Why is calculating return on ad spend important?

Calculating ROAS is the best way to measure a digital marketing campaign or channel’s performance. This can be used as a tool for deciding which channels and campaigns are worth your time, effort, and investment going forward.

How to calculate return on ad spend (ROAS)

You need to divide the total revenue from a campaign or channel and multiply that number by 100 to get a percentage result to calculate the ROAS. For example, if you spent $100 and made $300 in sales for a ROAS of 300%, your ad was worth every dollar.

What is a good average ROAS?

While ROAS can be used to compare the performance of campaigns, it is also a relative measurement. As such, there is no one-size-fits-all answer as far as what constitutes “good.” In general terms, anything over 100% is considered impressive and worth your time going forward if you want to maintain or improve ROAS.

How to improve your return on ad spend?

There are a few ways that you can go about improving your ROAS. Some of them require more time and effort than others. However, all have the same end goal in mind, which is to improve campaign performance.

1.   Improve your targeting

Tighter audience targeting with Facebook ads allows for better engagement which drives clicks and conversions at a lower cost-per-click.

2.   Increase your budget

More money to spend equals more ads running, which increases impressions and engagement for a lower cost-per-click or higher conversion rate at the same time.

3.   Experiment with different creative formats

Experimenting with video and carousel ad units can lead to better results than standard display units. Each format allows you to stand out more and engage users in different ways.

4.   Experiment with new placements

Like creative testing formats, experimenting with different ad units on new sites can help you quickly reach a larger audience. In summary, return on ad spend (ROAS) is a terrific way to quantify the success of your digital marketing campaigns. You can use online tools like AppsFlyer for this. This will allow you to assess campaign performance and optimize accordingly to improve ROAS across multiple channels.



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