ROAS (Return On Ad Spend) is a marketing metric used to measure the revenue generated from an advertising campaign relative to the advertising costs. ROAS enables a company to determine the effectiveness of its marketing investments and assess how profitable those investments were. The term literally translates to «return on advertising spend».
To calculate ROAS, you need to know the advertising budget and the revenue generated by the company from the advertising campaign. Then, you divide the revenue by the advertising costs. For example, if the revenue from the campaign was $1000 and the advertising costs were $200, then the ROAS would be 5. This means that every dollar spent on advertising generated $5 in profit for the business owner. This information not only allows you to evaluate the success of the advertising campaign, but also helps you plan subsequent ones. For example, if the ROAS is 5, then the business must spend at least $200 on advertising to generate $1000 in profit.
ROAS is used by most internet marketers because it is the simplest way to evaluate the success of an advertising campaign. A low ROAS value will be the first signal that the advertising needs to be optimized and that it is not generating enough revenue. ROAS is also used to compare the effectiveness of different promotion channels. For example, a marketer looks at how much return is generated from search contextual advertising, and then compares this metric with advertising on social media. This allows them to determine which channels should receive more resources and which ones should be abandoned.