What Is ROAS?

Key takeaways

ROAS, or return on ad spend, gauges how effective an advertising campaign is at converting customers and driving revenue. 

• You can calculate ROAS by dividing total ad revenue by total ad spend.

• When paired with KPIs like cost per click (CPC) or cost per acquisition (CPA), ROAS provides a more granular view of an ad’s performance.

• You can strengthen your marketing strategy by learning how to boost ROAS.

Discover what ROAS is, why it matters in digital marketing, and how to improve it. Afterward, enroll in Google’s Digital Marketing & E-commerce Professional Certificate to learn how to use analytics to measure marketing performance and engage customers through digital channels like search and email. 

What does ROAS mean?

ROAS, which stands for return on ad spend, is a key metric in digital marketing that measures the revenue generated by a business in relation to the amount of money it invests in an advertising campaign. ROAS gauges how effective an advertising campaign is at converting customers and driving revenue. 

ROAS formula: How to calculate ROAS

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, or $2 in revenue for every $1 spent [1]. The wider the ratio, the more profitable your campaign.

When combined with return on investment (ROI) and click-through rate, ROAS can give you insight into the performance of an ad campaign and whether customers are engaging with the campaign in a meaningful way.

Read more: Customer Analytics: Types, Tools, and Benefits

What is ROAS used for?

ROAS is important because it gives digital marketers insight into how their marketing campaigns are performing with a desired audience. The data is quantitative, or a reflection of how many people converted, and it is used to inform future ads, marketing strategies, and budgets. When you pay attention to a campaign’s ROAS ratio, you’ll have the opportunity to spend future dollars 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 very 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 optimize 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 that’s focused on brand awareness will have a lower ROAS than one focused on driving purchases.

How to increase ROAS?

Personalizing messaging across landing pages, re-engaging past customers with targeted ads, and enhancing customer lifetime value through loyalty programs are all effective ways to boost ROAS.

Related terms

• Click-through rate

• Market segmentation

• Marketing consultant

• Product marketing

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