R.O.A.S. = Returnon Ad Spend: A true measurement of calculated spend. ROAS tells your team exactly how much money you have earned as a result of spending on advertisements.
ROAS = Revenue made from advertising channel / (Advertising channel costs + expenses)
Example ROAS solution: Your team spends $500 on a new Facebook video ad. The copywriter your team typically goes with is busy so you pay $150 for new ad copy for this specific video ad. Your campaign ends up making your company $7000 after spending only $3500.
When calculating ROAS what is most commonly forgotten from even the industry veterans are individual expenses from the specific advertisement channel or your specific advertising campaign being analyzed.
Another easy mistake for marketers finding ROAS is by using an incorrect formula for example the INCORRECT: (Revenue made) / (Advertising costs) which does not gives you ROAS.
No, ROAS is not ROI.
The equation for ROI is completely different from ROAS, but is often confused to be the same.
The proper way to find ROI is, ROI = (Investment Gain – Investment Cost) / Investment Cost.
An example ROI equation can be as simple as when your company spends $200,000 on marketing one month and the investment earns you $250,000.
($250,000 – $200,000) / $200,000 = .25 = 25% ROI
How do I achieve “tip-top” ROAS?
Finding the best ROAS isn’t as simple as finding the best ROI. This may be difficult to grasp, but ROAS always comes down to your conversion rate. Some business models or industries may have a completely different expectations and goals.
We’ve included example ROAS across different categories from Nielsen.com. Diagram of the study can be found below.