ROAS stands for “return on ad spend.” It is a measure of the efficiency of an advertising campaign, calculated by dividing the revenue generated by the campaign by the amount of money spent on advertising.
For example, if a company spends £1000 on an ad campaign and generates £3000 in revenue as a result, their ROAS would be 3 or 300% (£3000 / £1000 = 3). This means that for every \£1 the company spent on advertising, they generated £3 in revenue.
ROAS can be a useful metric for evaluating the effectiveness of different ad campaigns and for determining how much to budget for future campaigns. A high ROAS indicates that the campaign was successful in driving revenue, while a low ROAS may indicate that the campaign was not effective and that the company may want to consider adjusting its strategy or spending more on advertising.
Using the example above, if a company spends £1000 on an ad campaign and generates £3000 in revenue as a result, their ROAS would be 3 (£3000 / £1000 = 3). If the company’s net profit from the campaign was £2000, their ROI would be 2 (£2000 / £1000 = 2). In this case, the ROAS indicates that the campaign was effective at driving revenue, while the ROI indicates that it was also profitable.
Are ROAS and ROI the same thing?
ROAS and ROI (return on investment) are related but distinct metrics. ROAS measures the efficiency of an advertising campaign, calculated by dividing the revenue generated by the campaign by the amount of money spent on advertising. ROI, on the other hand, is a measure of the profitability of an investment, calculated by dividing the net profit generated by the investment by the cost of the investment.
While both ROAS and ROI aim to measure the financial performance of a campaign or investment, they do so in different ways and can be used to evaluate different types of campaigns or investments. ROAS is typically used to evaluate the effectiveness of advertising campaigns, while ROI can be used to evaluate a wider range of investments, including marketing campaigns, business ventures, or financial instruments.
What is considered a good ROAS?
Return on Ad Spend (or ROAS) is an indication of how well your ads are doing.
There is no one-size-fits-all answer to what constitutes a “good” ROAS, as the ideal ROAS will depend on the specific goals and circumstances of each advertising campaign. Some factors that can affect what is considered a good ROAS include the nature of the product or service being advertised, the target audience, the competition, and the overall marketing strategy.
In general, however, a ROAS of 2-3 (or 200-300%) is often considered to be a good starting point for most campaigns, however, we tend to aim for a ROAS of at least 5x or 500% to maximise revenues for your brand.
This means, on average, for every £1 spent on advertising, the campaign generates £5 in revenue. Of course, it is possible to achieve a higher or lower ROAS depending on the campaign and the market conditions.
It’s important to note that ROAS is just one metric to consider when evaluating the success of an advertising campaign.
Other metrics, such as CTR, conversion rate, and customer lifetime value, can also be important indicators of success and should be taken into account when assessing the overall effectiveness of a campaign.
How can I improve my ROAS?
There are several strategies you can use to try to increase your ROAS:
- Optimise your ad targeting: Make sure you are targeting the right audience for your ad. If your ad is being shown to people who are not interested in your product or service, they are less likely to click on it, which will lower your ROAS.
- Improve the relevance and quality of your ad: Create ads that are relevant and valuable to your target audience. Ads that are poorly designed or low quality are less likely to be effective and may have a lower ROAS.
- Use persuasive and actionable language: Encourage people to take action by using language that is persuasive and compelling. Calls to action, such as “Buy now” or “Sign up for a free trial,” can help increase your ROAS.
- Test and optimise your ad creative: Try different versions of your ad to see which ones perform best. Use data from your ad campaign to identify which versions have the highest ROAS and focus on those.
- Use retargeting: Retargeting involves showing ads to people who have visited your website or shown interest in your product or service. This can be an effective way to increase ROAS because you are targeting people who are already familiar with your brand and are more likely to take action.
- Monitor and adjust your bid strategy: The amount you bid on an ad can have a big impact on your ROAS. If you are not getting enough impressions or conversions at your current bid, you may need to increase your bid to be more competitive. On the other hand, if you are getting a lot of impressions but not many conversions, you may need to lower your bid to reduce your ad spend.
