How to calculate ROAS

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how-to-calculate-roasWhat is ROAS?

R.O.A.S. = Return on 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.

ROAS = ($7000) / ($3500 + $500 + $150) = 1.6867
ROAS = ~1.68 = 168%

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.

Baby: 371%
Pet: 306%
Health & Beauty: 282%
Food: 267%
Over-the-counter: 259%

If you are using Google Adwords or BingAds, be sure to correctly define and track your conversions within the software.
AdWords conversion help page. BingAds conversion help page.

Using Google Analytics (or your preferred analytics software) you can set up custom goals which match with the UTM tracking codes. Google Analytics, specifically, allows you to create multi-channel funnels – which helps dramatically when finding ROAS from multiple marketing channels.
Campaign URL builder page. Google Analytics Goal Setup help page. Google Analytics multi-channel funnel help page.

If you or your team needs help with any of the above, please feel free to DM us on twitter @roas_io or send us an email: [email protected].

roas-charts

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    • admin
    • January 1, 2014
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    • admin
    • January 1, 2014
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      • admin
      • January 1, 2014
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      Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

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