ROI vs ROAS (Return on Ad Spend)

February 27, 2021

Main idea here is to identify whether your campaign is profitable or not.

Once you identify the numbers you can optimize the add campaign to generate more profits. Ultimate goal is your business to make profit

ROAS (Return on Ads Spend)

Definition : Return on advertising spend (ROAS) is a measure of how your advertising campaign performs. You do not take the profit margin

ROAS = Total Revenue / Cost of Ads

This simply says how much your revenue if you spend $1 for advertising

Example:

If you are selling your Invoice Software for $200 and your Google advertisement cost $75

Your ROAS is  200/75 = 2.66

You can earn $2.66 for every $1 you spend on advertising

Why  Return on Advertising is important?

You have to look at these numbers to identify whether your PPC campaign generates some revenue for you.

ROAS is an important matrix to identify which advertising work best for their online business. For example e-commerce stores can run Google PPC campaign, FaceBook advertising campaign and Pinterest Ads campaign. So you should be able to identify what is the good campaigns for our business and how to optimise those campaigns

What ROAS numbers are good

This depends on your health of business  and you can work hard to get a good number. ROAS benchmark value is 4:1 ration. If you have winning product or service the possibility is high to get higher number

If your profit margin is 40%  what is the break even advertising cost per $1 profit?