What is ROAS and why is it important?

Let’s cut to the chase

For anyone who doesn’t know, ROAS, in the digital marketing world means return on ad spend. This is a metric that advertisers use to forecast how effective they spend money on advertising.

To calculate your ROAS, you use the revenue you have generated from your ads and divide it by the cost you have spent on your ads. You with me?

One of the main components in an ad campaign is calculating your ROAS and it is important because it can give you a quick insight to the profitability of your campaign. It doesn’t matter if you want to see the insights of the entire campaign or individual keywords because it will enable you to see exactly which components are the most efficient and working the best for you.

You can look into conversions, the conversion value and conversion rate if you want an idea of how well your keywords are working for you. But, the crux of it is, if you happen to have a number of conversion types and or products that generate different levels of revenue, by analysing one level deeper really can be crucial to running the utmost profitable and efficient campaign.

There isn’t a single metric that can be the only influence to your campaign in digital marketing. There are so many factors that are so valuable, in my opinion, to your ad campaign. Not one single metric will be the be all and end all. Sometimes it’s worth focusing on one KPI over another. It all comes down to the business, what works for one will work differently for another. Generating revenue is different for, let’s say, e-commerce businesses and lead generation. Although ROAS in lead generation may not give you immediate action items, it can give you a rough idea of lead quality so you should be reviewing that on a regular basis. Some KPIs may be more effective than others depending on their business goals and their business models. Things like target Cost Per Acquisition are much more common for e-commerce businesses selling larger items when the customer value is higher. This is why ROAS is important in this circumstance, as you will have a better understanding of the profitability of specific keywords and items.

On that note, it’s time to think about your ROAS, no matter what ads you are running it is worth it as it can help you forecast your revenue and in turn help you make better decisions for your ad campaign and what steps to take next.

It’s all about the steps,

From baby steps,

To the next step up, and ultimately,

Your steps to success.

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