ROAS stands for Return on Advertising Spend, which is a marketing metric used to measure the efficacy of a digital advertising campaign. It is calculated by dividing the revenue attributable to ads by the cost of the ads and multiplying the result by 100. ROAS helps online businesses evaluate which advertising methods are working and how they contribute to the businesss bottom line. By keeping careful tabs on ROAS, ecommerce companies can make informed decisions on where to invest their ad dollars and how they can become more efficient. ROAS is essential for quantitatively evaluating the performance of ad campaigns and how they contribute to an online store's bottom line.
ROAS is similar to return on investment (ROI), but it focuses specifically on the revenue generated from advertising campaigns. While ROI measures the return from larger marketing and business efforts, ROAS is a short-term measurement that is best used to determine if advertisements are driving revenue effectively. A good ROAS depends on a number of factors, including the business's advertising goals and profit margins. Some businesses require an ROAS of 10:1 in order to stay profitable, while others can grow substantially at just 3:1.
ROAS is most useful in mobile marketing when businesses have scaled to the point that they are tracking multiple campaigns, channels, and ad platforms, and need oversight. By tracking ROAS across campaigns and ad platforms, marketers can measure, evaluate, and compare the effectiveness of their advertising efforts.
