Asking yourself, “what is ROAS?” or “what does ROAS mean”? Well, you’re in the right place!
On this page, we’re diving into all things return on ad spend! So, just keep reading to learn more about the ROAS definition!
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Key Takeaways
ROAS is a marketing metric that assesses the performance and financial return of a digital advertising strategy, campaign, or ad group.
To calculate ROAS, use the ROAS formula, which divides your ad strategy’s total revenue by its total cost, to calculate your return on ad spend: ROAS = Revenue / Cost
ROAS in marketing is essential for informing your company and your team about the performance and quality of your ad campaign.
A good ROAS is usually a 4:1 ratio — $4 in revenue to $1 in ad costs.
How to calculate ROAS
Now that you know the answer to the question, “what is ROAS in marketing,” let’s dive into how to calculate ROAS.
Graphic showing the ROAS formula
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To calculate ROAS, use the ROAS formula, which divides your ad strategy’s total revenue by its total cost, to calculate your return on ad spend: ROAS = Revenue / Cost
What is ROAS?
ROAS is a marketing metric that assesses the performance and financial return of a digital advertising strategy, campaign, or ad group. Using and measuring this metric can help companies improve their ad strategies and monetary returns.
Why ROAS matters
So you now know how to calculate and the answer to the question, “what is ROAS.” Now let’s explore why it’s important!
ROAS in marketing is essential for informing your company and your team about the performance and quality of your ad campaign. Return on ad spend provides you with actionable data you can use to optimize your ad spend. Without the calculation, it becomes easy to waste your ad spend and diminish the number of leads and sales coming in from advertising.
Expert insights fromwebfx logo
Rebekah
Rebekah L.
Senior Internet Marketing Producer
“Tracking allows you to measure how your campaigns are performing and if they’re profitable to ensure you’re making the best use of your marketing dollars. This can help you determine where to allocate budget or which campaigns need more attention to bring your up to par.
Having a target also allows you to monitor the impact of your optimizations over time, so you can learn what does and doesn’t work to build a stronger strategy over time.”
What is a good ROAS?
Graphic showing a good ratio
A good is usually a 4:1 ratio — $4 in revenue to $1 in ad costs. There is no right answer, however, because some businesses might need more or less revenue to operate. The average return on ad spend is 2:1 — $2 in revenue to $1 in ad costs.
What determines a good ? Now that you know the answer to the question, “what is a good ,” let’s dive into what determines it. When it comes to determining a good for your company, you need to think about the following:
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Rebekah
Rebekah L.
Senior Internet Marketing Producer
“There are a variety of factors that need to be considered when determining a , the main one being profit margins. A larger profit margin can support a lower while a smaller profit margin will need a higher to remain profitable.”
Once you figure out these details, you can uncover the optimum dollar amount for your business.
ROAS vs. ROI: What’s the Difference
So you know the answer to the question, “what is a advertising material good ROAS.” Now let’s dive into the main differences between and ROI.
Graphic showing the differences between vs. ROI
ROI calculates how much your company makes from advertising (or another channel) after expenses, which includes operational costs, turnover, and more. In comparison, return on ad spend determines how much your business earns (on average) from advertising only.
Since they measure different aspects of your campaign, return on ad spend and ROI also use different formulas.
Formula ROI Formula
Revenue / Cost
ROI = Net Profit / Total Investment*100
If you’re struggling to remember the differences between ROI and return on ad spend, think about the two from this perspective. in marketing measures your average return from advertising, while ROI measures your total return from advertising.
Got questions about return on ad spend? Find the answers here!
metric that measures the amount of revenue you earned for every dollar you spent on advertising. In other words, it shows you how much you made on your advertising investment.
How is ROAS calculated?
is calculated using the following formula: Revenue / Cost
For example, if you spent $1000 on your aob directory advertisements and earned $2000 in revenue, your is $2 for every $1 spent, or 200%.
What is a good ROAS?A good can vary depending on your industry, size of your business, and more. However, a good is usually a 4:1 ratio, or $4 for every $1 earned on average.
Why is important? is an essential metric for marketers and advertisers to understand how their campaigns perform. By calculating , you can understand exactly how much revenue you’ve earned from your campaigns, and determine which advertisements drive the most revenue for your business.
WebFX helps companies like yours reach their business goals
“Our marketing department has a lot of key performance indicators that Web FX has always helped us achieve… Web FX has always worked hard to make sure that we’re getting what we need out of the partnership, not just what may seem like the best result.”
Hydro Worx Improve your ROAS with help from Web FX So now you know the answer to “what is ROAS,” along with how to calculate ROAS in marketing, why it’s important, and what makes a good return on ad spend.
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