Return on ad spend (ROAS) is a marketing metric that measures revenue earned for each dollar spent on advertising. By calculating and tracking ROAS, you gain insights into the effectiveness of your advertising, which can help determine future marketing direction and improve efficiency with ad spend.
To calculate ROAS, you must divide the revenue attributed to your ad campaign by the cost of that campaign:
ROAS = 100 * total ad revenue / total ad spend
The more effective your campaign, the larger your ROAS and the more revenue you have earned for each advertising dollar spent. To improve your ROAS, you can lower your ad spend and review your ad campaigns. For example, you might want to optimize your landing pages or rethink negative keywords.
While return on investment (ROI) is a bigger-picture metric that measures the total return of overall investment, return on ad spend (ROAS) only calculates your return in regard to a specific ad campaign. By combining ROAS with other metrics such as cost per acquisition (CPA), cost per lead (CPL), and cost per click (CPC), advertisers get a more complete picture of the KPIs they need to hit in order to reach certain revenue targets.
