ROI vs ROAS (Return on Ad Spend)
Why do you need compare ROAS vs ROI ?
The main idea here is to identify whether your campaign is profitable or not. So when you compare ROAS vs ROI you can determine the success of your campaign.
Once you identify the numbers you can optimize the Ad campaign to generate more profits. The ultimate goal is for your business to make a 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
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?
Frequently Asked Questions
Is Roas the same as ROI?
ROAS and ROI are not the same. When you look at the formula to calculate ROI and ROAS you can identify the difference.