What is ROAS?
ROAS stands for Return on Ad Spend, and it’s a way to measure how much money you’re earning for every dollar you spend on advertising.
Think of it like this: If you spend $1 on an ad and earn $4 in sales because of that ad, your ROAS is 4:1 (or just “4”). It means for every $1 spent, you’re getting $4 back.
How Do You Calculate ROAS?
The formula is simple:
ROAS = Revenue from Ads ÷ Cost of Ads
For example:
- If you spend $100 on ads and those ads generate $500 in sales:
- ROAS = 500 ÷ 100 = 5 (or 5:1)
Why is ROAS Important?
ROAS helps you:
- Understand Profitability: Are your ads making more money than they cost?
- Compare Campaigns: Which ad campaigns are performing better?
- Make Smarter Decisions: Focus your money on the ads that are driving the best results.
What’s a Good ROAS?
It depends on your business. For most businesses:
- A ROAS of 1 means you’re breaking even (spending $1 and earning $1 back).
- A ROAS above 1 means you’re making a profit.
- A ROAS below 1 means you’re losing money.
For example, if you sell high-margin products, like software, you might aim for a higher ROAS (e.g., 5 or more). If you sell lower-margin products, like groceries, a ROAS of 2 might still be great.
Bottom Line
ROAS is like a report card for your ads—it shows how much bang you’re getting for your buck. The higher the ROAS, the better your ads are performing.
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I’m Ivan Jimenez, a digital marketer with over a decade of experience in marketing and advertising (and the creator of this website).
This is my passion project… helping people create highly optimized content designed to position them as authorities in their space so they can land higher paying jobs that actually appreciate their value, attract amazing clients, and live their best favorite life.
If your goal is to become a thought-leader, grow your influence, and allow opportunities to find you (instead of the other way around), then you need to read this right now.