Return On Ad Spend (ROAS) Calculator
Input your advertising information below to calculate your Return On Ad Spend.
One of the most valuable insights you can gain from selling online is the ability to digitally track revenue. With the power of digital, you can track where your customers come from, how they find out about your business, the pathways they use to reach your product, and more.
When it comes to advertising-generated revenue, there is one key metric that tells the story of effectiveness: ROAS or Return On Advertising Spend.
What is ROAS?
ROAS (Return On Advertising Spend) is a measurement of a revenue generated against advertising investment. ROAS is typically used in the online advertising space, but can also be used for traditional advertising. However, it becomes more difficult to track without the typical footprint afforded to digital marketing.
How is ROAS Measured?
ROAS is typically measured as a percentage, dollar value, or ratio. For example, a $10,000 investment in digital advertising that generates $100,000 in revenue would yield a 1,000% ROAS, which can also be reflected as $10 ROAS or 10:1 ROAS. At the end of the day, for every $1 you invest in advertising, you get $10 in return.
How is ROAS Calculated?
The ROAS calculation is actually quite simple. ROAS is your revenue generated divided by advertising spend. For example, a $5,000 investment in advertising that generated $100,000 in revenue would calculate as:
100,000 / 5,000 = 20
This would mean every $1 in ad spend generated $20 in revenue and can be reported as $20 ROAS, 20:1 ROAS, or 2000% ROAS.
What should my ROAS target be?
Your ROAS target will vary depending on many factors. Your product, industry, competition, advertising medium, campaign type, and several other factors will come into play with your target and achievable ROAS. Typically, higher-funnel or awareness campaigns will result in a lower ROAS and lower-funnel or conversion-focused campaigns will result in a higher ROAS.
However, just because lower-funnel advertising results in higher ROAS, it doesn’t mean you should allocate all of your budget to those tactics. In the larger marketing context, you still need to generate an awful lot of awareness in order to have enough potential customers in the conversion pool. Think of the marketing funnel. There’s a reason the top of the funnel is bigger than the lower part of the funnel. Brands with healthy advertising budgets will typically tap out the available lower-funnel market and will need to find other advertising outlets to continue to drive demand.
While not always true, below is a list of advertising campaigns and where they fall in the ROAS spectrum.
Lower ROAS Campaigns:
- Facebook Awareness Campaigns (Reach, Traffic, Engagement objectives)
- YouTube Advertising
- Google Display Ads
Medium ROAS Campaigns:
- Google Search Ads
- Facebook Remarketing Ads
Higher ROAS Campaigns:
- Google Shopping Ads
- Facebook Catalog Remarketing Ads
- Google Remarketing Display Ads
- Amazon Ads
Generally speaking, your marketing investments should always return more revenue than they cost. We believe that marketing is always an ROI-positive activity. Because of this, and at the highest level, all of your advertising campaigns combined should AT LEAST deliver 100% ROAS. A 100% or 1:1 ROAS means for every dollar invested, you are getting that one dollar back. This means you are breaking even. And, if you consider the net margin on your products/services and other factors, you are still probably losing money.
It is also worth considering that you simply may not be able to accurately measure your ROAS. Attribution, mixed mediums, campaign layering, and more can all hinder your ability to accurately measure the outcome of your advertising. You also may not directly sell your products or services on your website. However, at the end of the day, you should see noticeable results from your marketing activity. If you aren’t, you may want to schedule a free call with us ASAP.