Sarah Berry is a Lead Web Marketing Consultant at WebFX. With more than 10,000 hours of experience, she offers practical insights and strategies you can use to grow your digital revenue. When she isn’t polishing her Time Magazine Person of the Year Award, she’s spending time with her flock of ducks.
What is ROAS?
Return on ad spend (ROAS) is a marketing metric that measures the amount of revenue earned for every dollar spent on advertising. You can calculate your return on ad spend using the following formula: Revenue Attributed to Ad Spend / Advertising Costs.
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!
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.
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 ROAS 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 from
Rebekah L.Senior Internet Marketing Producer
“Tracking ROAS 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 ROAS up to par.
Having a ROAS 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?
A good ROAS 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 ROAS?
Now that you know the answer to the question, “what is a good ROAS,” let’s dive into what determines it. When it comes to determining a good ROAS for your company, you need to think about the following:
Your industry
Your profit margins
Your average cost-per-click (CPC)
Expert insights from
Rebekah L.Senior Internet Marketing Producer
“There are a variety of factors that need to be considered when determining a ROAS, the main one being profit margins. A larger profit margin can support a lower ROAS while a smaller profit margin will need a higher ROAS to remain profitable.”
Once you figure out these details, you can uncover the optimum dollar amount for your business.
So you know the answer to the question, “what is a good ROAS.” Now let’s dive into the main differences between ROAS and 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.
ROAS Formula
ROI Formula
ROAS = 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. ROAS in marketing measures your average return from advertising, while ROI measures your total return from advertising.
ROAS FAQs
Got questions about return on ad spend? Find the answers here!
What is ROAS?
ROAS is a 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?
ROAS is calculated using the following formula: ROAS = Revenue / Cost
For example, if you spent $1000 on your advertisements and earned $2000 in revenue, your ROAS is $2 for every $1 spent, or 200%.
What is a good ROAS?
A good ROAS can vary depending on your industry, size of your business, and more. However, a good ROAS is usually a 4:1 ratio, or $4 for every $1 earned on average.
Why is ROAS important?
ROAS is an essential metric for marketers and advertisers to understand how their campaigns perform. By calculating ROAS, 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 WebFX has always helped us achieve… WebFX 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.”
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.
But when your ads fail to generate the revenue and results that your business needs, it places your company (and you) in a difficult spot.
Learn more about how our paid advertising services, from search to social, can help your business earn an impressive return on ad spend by contacting us online or calling us at 888-601-5359to chat with a strategist about your goals, company, and more!
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Craft a tailored online marketing strategy! Utilize our free Internet marketing calculator for a custom plan based on your location, reach, timeframe, and budget.
Craft a tailored online marketing strategy! Utilize our free Internet marketing calculator for a custom plan based on your location, reach, timeframe, and budget.
Sarah Berry is a Lead Web Marketing Consultant at WebFX. With more than 10,000 hours of experience, she offers practical insights and strategies you can use to grow your digital revenue. When she isn’t polishing her Time Magazine Person of the Year Award, she’s spending time with her flock of ducks.
