Return on Ad Spend (ROAS)

Return on Ad Spend (ROAS)

What is ROAS?

ROAS stands for return on ad spend. It is a marketing metric that measures the effectiveness of an advertising campaign based on revenue earned. The higher ROAS that an advertising campaign has the better. ROAS can help organizations determine which of their ad campaigns are working well, while also helping to identify how they can be improved moving forward.

Calculating ROAS

To calculate ROAS, you simply have to divide the ad campaign’s gross revenue by the cost of the ad campaign.

ROAS = gross revenue from ad campaign / ad campaign cost

For example, a company spends $5,000 on a video display advertising campaign. Over the course of the month, revenue of $20,000 is generated as a result of the conversions from this campaign.

ROAS = $20,000 / $5,000

ROAS = 4 or 4:1

This means that the company made $4 for every dollar spent in the ad campaign.

Why does ROAS matter?

ROAS is a very important statistic that is used to gauge how effective an advertising campaign is. It measures effectiveness in a quantitative way and shows how the ad campaign affects the business’ bottom line. When viewed in conjunction with other first party data that is gathered, ROAS can be valuable in determining future budgets and ad campaign strategies.

Related Media KPIs:

What is a KPI?

A key performance indicator, or KPI, is a measurement used to evaluate the success or failure of a business objective undertaken by a company, team, or individual.

Cost per Click (CPC)

CPC is short for cost per click – it is the price you pay for each click in a pay-per-click campaign. This metric is an important one, as keeping CPC down is important to ensure a good return on investment.

Cost per Thousand (CPM)

Cost per thousand (CPM) is also known as cost per mille (“mille” means “thousand” in Latin). It is a term used to indicate the price per 1000 advertising impressions on a single webpage. It’s easier to compare and measure a $8 CPM than $0.008 cost per impression. It’s a standard defined by both the industry and the IAB. 

Cost per Point (CPP)

Cost per Point (CPP) measures cost efficiency. It compares the cost of one advertisement to the cost of another, such as a display ad versus an OOH ad. How is it calculated? Take the Media Cost and divide it by the GRPs. 

The difference between CPM and CPP is that CPP looks at cost efficiency of a singular ad, rather than the cost of 1000 ad impressions.

Return on Marketing Investment (ROMI)

Return on marketing investment (ROMI) is a subset of ROI that measures the overall effectiveness of a marketing campaign. ROMI is calculated by measuring the profit attributed to a marketing campaign divided by the cost of the campaign.

Conversion Rate

The name “conversion rate” says it all. It is the percentage of visitors to a given webpage that complete a task that you want them to do (convert) – this can include things like making a purchase, submitting a form, or engaging the site some other way.

Click Through Rate (CTR)

When it comes to digital marketing, click through rate refers to the percentage of individuals that click on an advertisement when visiting a webpage. The higher the click through rate, the more successful and engaging the advertisement has been.

View-through-rate

View-through-rate is the percentage of people who viewed an ad and watched it all the way through.

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