Sometimes, advertising online can feel like guesswork if you don’t have the right metrics to measure whether your ads are working or not. Among all metrics, the most important metric for marketers is ROAS (Return on Ad Spend). This calculation helps you understand how well your ads perform and in which area you should spend more of your budget.
If you are looking to boost your ad performance, you should understand how to use a ROAS calculator. The tool helps you quickly experiment with different advertising budgets and revenue goals. Knowing this ROAS metric can make a big difference in your profitability. So let’s discuss everything you need to know about ROAS calculations!
ROAS vs. ROI
Many people confuse ROAS with ROI (Return on Investment). While both measure performance, they are different.
- ROAS focuses solely on ad performance and shows the revenue generated compared to ad costs.
- ROI considers all business costs, not just the ad spend.
For example: If you spend $100 on your ads and it gives you a return of $500, your ROAS (Return on Ad Spend) is 5x. In other words, you earned five times what you spent. But, if you include other costs like production, delivery, or platform fees, your overall profit (ROI) will be lower.
ROAS Predicts Performance Better Than Other Metrics
Other metrics like clicks, impressions, and CTR (click-through rate) are very helpful, but they don’t show you the full picture. On the other hand, ROAS tells you if your campaign is profitable or not. A high click rate might seem good, but if those clicks don’t convert into sales, it’s just a waste of money.
ROAS shows you how much money you’re making from your ads compared to what you’re spending. It helps you understand which ads help you get more sales and which ones aren’t, so you can easily see what’s working well and what needs improvement.
If your ROAS is high it means your ads are driving more traffic and meaningful results. That’s why marketers prefer this metric when they need to decide where to allocate their budget.
Benchmarking ROAS
Before optimizing your ads, you need to know what a good ROAS looks like. The ROAS benchmark varies from industry to industry. For example:
- E-commerce often aims for at least 4x ROAS or higher.
- SaaS companies may accept a lower ROAS because their main profit comes from keeping customers long-term, instead of making quick sales from one-time purchases.
You can also use the ROAS calculator to experiment with different advertising budgets and revenue goals. This helps you set achievable goals and identify the campaigns that will not perform well.
How to Find ROAS in Google Ads?
Google Ads has a built-in tool that you can use to calculate ROAS. To find your ROAS you can follow the steps:
- Go to your campaign reports.
- Take a look at the columns “Conversions Value” (total revenue) and “Cost”.
- Divide revenue by cost.
These values are updated in real time, so you can analyze changes as your campaign progresses.
Tracking Your ROAS Over Time
ROAS is not only about the “set it and forget it” approach. It fluctuates based on your targeted budget and audience behavior. To make sure you’re optimizing your campaigns the right way, you must regularly track the ROAS. This way, you can:
- Spot underperforming campaigns early.
- Adjust bids to improve performance.
- Measure the long-term success of your ads.
How to Use ROAS to Optimize Your Ads?
Now you understand how ROAS is calculated, so let’s see how it helps you optimize campaigns.
- Identify top-performing ads: Through this, you can easily identify which ads have the highest ROAS so that you can allocate more budget to them.
- Test different creatives: If your ROAS is low, try to adjust your ad copy, images, or offers to see what works best for you.
- Adjust targeting: Narrow your audience to focus on users who are more likely to take action, such as those with higher intent to purchase.
- Refine your bid strategy: Experiment with cost-per-click (CPC) or cost-per-acquisition (CPA) to find the sweet spot.
ROAS Optimization on Facebook and Google Ads
Optimizing ROAS can vary depending on the platform you’re using:
On Facebook, you can:
- Use custom audiences in order to retarget those people who have previously made a purchase or visited your site.
- Create Lookalike Audiences on Facebook to find new users who share similar characteristics and behaviors with your best existing customers.
- Test different ad formats, such as carousel ads or videos, to determine which ones engage your audience the most and drive better results.
With Google Ads, you can:
- Focus on high-converting keywords by analyzing search data to identify the terms that drive the most relevant traffic and conversions.
- Use Smart Bidding strategies, such as Target ROAS, to automate bid adjustments and optimize your campaigns for the best return on ad spend.
- If you’re in e-commerce, you can use shopping ads to increase product visibility and drive more qualified traffic directly to your product pages.
Both platforms provide detailed insights, so take advantage of this data to make your decisions accordingly.
Relevant Questions!
How to find ROAS?
You can use the ROAS calculator to get accurate results right away. But if you want to calculate it manually then:
- Divide your total revenue by your total ad spend. For example, $500 revenue ÷ $100 ad spend = 5x ROAS.
What’s a good ROAS for PPC campaigns?
For PPC campaigns, a ROAS of 3x to 5x is often considered good. But it also depends on your industry.
Why is my ROAS low?
A low ROAS could indicate issues such as poor targeting, unengaging creatives, or low-quality traffic that aren’t converting effectively. So you can adjust your campaign accordingly to fix these issues.
Is ROAS the only metric I need to track?
No, ROAS is very important but you should also consider other metrics like CPA, CTR, and conversion rates to have a complete picture.
