ROAS (Return On Ad Spend) is a performance indicator that measures the amount of revenue earned for every dollar spent on advertising. Similar to Return On Investment (ROI), ROAS measures the return on investment of money spent on digital advertising.
ROAS can be calculated using a simple formula. For example, an advertising campaign where you invest $1000 and you are able to attribute $5000 in revenue to that advertising campaign. Using the ROAS formula, you can determine an ROAS of 5. To know what ROAS is a good outcome for your business, you need to consider several factors, including your profit margins, your industry and your average cost of goods sold.
ROAS is intended to help advertisers and marketers like us determine the overall effectiveness of digital marketing campaigns by calculating the exact amount of revenue generated by the campaign.
It’s also important to consider other performance metrics in order to evaluate the effectiveness of a campaign. Metrics such as cost per click (CPC), reach, impressions, frequency, click-through-rate (CTR%), conversion rate, cost per acquisition (CPA) can all be important performance indicators to consider.
Tracking digital marketing metrics and key performance indicators gives a real-time view of campaign performance and should all be analyzed to fully understand the effectiveness of a campaign.
There are many other performance indicators that can be used to analyze campaigns. What is most important when defining a performance indicator is to choose what to measure according to the campaign objectives. For example, a brand awareness campaign will not use the same performance indicators as a conversion campaign.