What is return on ad spend? Return on ad spend, also known as ROAS, measures the financial results of paid ads you’ve placed for your business. Tracking this revenue is important because it shows how financially effective your digital ads are.
ROAS is similar to return on investment, though it’s more specific. Your ROAS shows you the success of exact metrics such as campaigns, ads and even keywords. Unlike just tracking clicks, ROAS can help you better understand what converts and what doesn’t. Knowing your return on ad spending helps you both advertise and spend more wisely.
How to calculate return on ad spend
There are multiple ways for you to calculate your return on ad spend. The simplest way is to divide revenue by cost. This will give you a basic overview, but it doesn’t consider other factors such as overhead costs.
If you want a more specific calculation, subtract your overhead cost from your revenue. Then divide that number by the cost of your ad campaign. If you’re unsure, you can find ROAS calculators online.
Knowing the return on ad spend for your business will not only help you better understand how your investment is contributing to your store’s bottom line. It can also help you see where to improve in your advertising, allowing you to run more successful ad campaigns and grow your revenue.
How to improve return on ad spend
- Identify and replace keywords with a high cost but low conversion
- Refine keywords by using more specific long-tail keywords
- Improve your Google quality score
- Take steps to reduce the number of customers who abandon their carts
- Ensure that your website is optimized for mobile devices