ROAS refers to “Return On Advertising Spend.” Marketers use ROAS to determine how effective their advertising campaigns are, where they should be investing, and how much they should be investing.
For every dollar you’ve spent on advertising, how much revenue are you building? As a digital marketer, understanding ROAS is one of the best tools you can have in your belt. If your ROAS is going down, then you may have saturated the market and may need to move on to a different channel. If your ROAS is going up, you’re doing something right; you may even want to spend more to increase this positive performance. If your ROAS on one channel is better than another channel, you may want to shift your advertising dollars.
The bottom line is that understanding your ROAS can help you make better decisions about future ad campaigns. But first, you need to calculate your ROAS.
A Basic ROAS Formula
ROAS will be expressed as a percentage, because it’s the percentage of advertising dollars that is being returned. The ROAS formula above is very simple, but the metrics involved can be far more complex (warning, math ahead).
But while ROAS can appear to be straightforward, it often isn’t. Consider an organization with multiple marketing campaigns—TV, print advertising, cold-calling. It can feel nearly impossible for the organization to really determine which channels revenue is coming from. This is especially true in the digital age, when marketers may be managing multiple social media platforms alone. ROAS works best when organizations are able to properly track their buyer’s journeys—but it also still needs to be understood that under any multi-channel marketing campaign, multiple channels may ultimately lead to sales. Below is an example of how to think about measuring ROAS when considering a cross-channel advertising strategy.
Because different types of organizations have different types of campaigns and buyer journeys, different tools can and should be used to measure ROAS.
The Best Tools for Measuring Return on Ad Spend (ROAS)
Facebook + Google Ads ROAS Template
Most marketers are running paid ads across the two behemoths of digital advertising, Facebook and Google. Joinr is a free tool that automatically fetches ad data from these two channels (and more), unifies them, and then calculates the return on ad spend of your campaigns in the ROAS Google Data Studio (GDS) template.
Simple ROAS Calculator>
Here’s a free tool that will calculate the ROAS for your paid media campaigns. To use this tool, you’ll need to manually assemble all of the metrics required from all of your cross-channel advertising campaigns. This is a great tool for marketers with their ad data already aggregated and unified.
Facebook Ads ROAS Calculator
Facebook will calculate your return on ad spend automatically (gee, thanks Facebook!) … kind of (we knew there was a catch). You can read about their internal method of calculating ROAS here—but the gist is that this metric might actually be an estimation based on missing information, or rounded/modeled data.
Whether you’re calculating the return on ad spend for ads launched on a singular platform or a cross-channel paid advertising campaign spanning many platforms, you’ll need a great tool to make sure your calculations are correct. Make sure the data you’re using for each metrics within the ROAS formula is complete and accurate and you’ll be on your way to understanding the business impact of your campaigns, and how to launch even better ads in the future.