Return on Ad Spend (ROAS)
ROAS is the sales you get from running an ad. It is simply read as revenue from ad campaign vs. ad campaign expenditure. If you had, for example, an ad campaign that cost $1000, and you received revenue from that campaign that totaled $4000, your ROAS would be 4:1, which is a decent return.
ROAS is simpler than ROI. Return on Investment takes into account the profit made vs. the entire campaign expense. ROAS only looks at revenue and advertising expense. Although not comprehensive, ROAS is an important metric to track. It is important to look at other data and metrics to get the full picture of your return on investment.
What gets the best ROAS?
In the following results from 2018 US advertising data, return on ad spend can be anywhere from $4-11 for every dollar spent on advertising. Digital Search advertising came out the winner by far.
- Television 6.5:1
- Out of Home (Outdoor) 5.97:1
- Radio 4.95:1
- Print 4.12:1
- Digital display 4.83:1
- Digital Search 11.05:1
ROAS Break-Even Point
With ROAS, the break-even point where you level out revenue and expense has to take into consideration the profit margin on your product.
If your profit margin is 50%, you need to make $2 for every dollar spent to break even. (The formula is 1 ÷ 50% = 2, or 200%) If your profit margin is 30%, you need to make $3.33 (3.33:1) for every dollar spent to break even. (1 ÷ 30% = 3.33, or 333%) You can read more about these calculations in this article by HubSpot.
