What is ROAS?
ROAS is Return On Ad Spend, which is simply to say that it is the revenue made from the dollars spent on advertising.
ROAS does not take into account other expenses beyond ad spend, so it is not a full picture of a digital advertising campaign (because we haven’t yet fully automated advertising!).
ROAS is a great metric for advertising professionals to know, however, because it is the hardest metric to optimize. You can always (often?) spend less time and less money on other parts of advertising (such as design or copy), but getting to ROAS-positive is the first step to an ROI positive campaign and advertising program.
How to calculate ROAS
Simply put, ROAS is Revenue from the campaign divided by Ad Spend
So if you spend $1,000 on ads and make $10,000, your ROAS is 10:1. If you spend $1,000 and make $3,000, your ROAS is 3:1.
ROAS is different from ROI, which is Return On Investment.
ROI takes into account everything involved in running ads or just doing a campaign, such as design and creative and copywriting and even your team’s time.
ROAS is far simpler to calculate, as it’s just how much did we spend and how much did we make.
It doesn’t tell the whole picture, but getting ROAS profitable is the first step to a profitable ROI, which is the first step to scaling.