What is ROAS?
ROAS is an abbreviation for "Return on Advertising Spend", which refers to the revenue generated relative to the amount spent on advertising. ROAS is used in marketing generally, at campaign level, ad level, and more, to assess profitability.
In other words, how much money do we earn compared to how much we spend on marketing. A ROAS of 500% means, for example, that we get our money back 500%/5 times over.
ROAS is closely related to the concept of ROI (Return on Investment), which is also widely used to evaluate the effectiveness of marketing efforts.
How do you calculate ROAS?
ROAS is calculated by comparing the revenue generated from marketing in total, from individual campaigns or ads, against the costs spent on them:
Formula for calculating ROAS:
ROAS = Revenue / Cost
If you want ROAS as a percentage, simply multiply your ROAS by 100.
An example of a ROAS calculation could be that you spend 1,000 DKK on a Google Ads ad. The ad generates revenue of 5,000 DKK:
ROAS=5000/1000=5.
This means the Google ad gives you your money back 5 times/500% over.
TIP:
You can often find your ROAS at campaign and ad level directly within the individual advertising tools.
When is a ROAS good?
As long as your ROAS is positive, you are making money from your marketing. If your ROAS is negative, you are losing money on your marketing.
So broadly speaking, a ROAS is good if it is positive. However, in the vast majority of cases, you should aim for more than "just" a positive ROAS.
What constitutes a good ROAS depends on the industry you operate in, the purpose of the marketing, the individual campaigns, and more.
In some industries a ROAS of 2 is good, in others a ROAS of 10 is good. We have experience across markets and industries and know what it takes to achieve the highest possible ROAS regardless of the channel.
Would you like a no-obligation chat about your current ROAS and how we can improve it?
Call us on 30 12 42 72 and let's have a no-obligation conversation!
