What Is ROAS?

ROAS, which stands for return on ad spend, is a vital metric in digital marketing that measures a business's revenue generated with the amount of money it invests in an advertising campaign. ROAS gauges how effectively an advertising campaign converts customers and drives revenue.

ROAS is a key performance indicator (KPI), which means it’s an accurate and concrete way to measure a marketing campaign’s success. You calculate ROAS by dividing total ad revenue by total ad spend. For example, say your business makes £5 in revenue for every £1 spent on the ad campaign. This means that your ROAS is 5:1. Google considers the average return on ad spend to be 2:1 [1], equating to £2 for every £1 you spend. The wider the ratio, the more profitable your campaign.

When combined with return on investment (ROI) and click-through rate, ROAS can give insight into an ad campaign's performance and whether customers engage meaningfully.

ROAS is essential because it gives digital marketers insight into how their marketing campaigns perform with a desired audience. The data is quantitative, or a reflection of how many people converted, and it can inform future ads, marketing strategies, and budgets. When you pay attention to a campaign’s ROAS ratio, you can spend future funds more efficiently.

When planning a marketing campaign, it helps to set your ROAS goals before launching ads. This way, you can monitor performance from the start and adjust the content or type of ads as needed. You can also combine ROAS with other KPIs, like cost per click (CPC) or cost per acquisition (CPA), to get a more granular view of an ad’s performance.

If you are running multiple ad campaigns at once, ROAS is a great way to judge the effectiveness of one campaign against another. It’s possible to then optimise your ads through new keywords and engaging landing pages, which helps to reduce overall ad spend. Keep in mind, too, the different goals you have for each ad campaign. A campaign focused on brand awareness will have a lower ROAS than one focused on driving purchases.

Related terms

• Click-through rate

• Market segmentation

• Marketing consultant

• Product marketing

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ROAS is an essential metric in digital marketing because it gives marketers a clear picture of their campaigns' effectiveness. In turn, it helps drive improved and informed marketing decisions and optimise campaigns to maximise the return on investment.

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