In digital and mobile advertising, return on ad spend (ROAS) is a key performance indicator (KPI). It is the ratio of a campaign's revenue to its advertising expenditures. Following the notion of return on investment (ROI), it demonstrates the earnings generated from each advertising expenditure and may be evaluated at both the aggregate and individual levels. Return on ad spend (ROAS) marketing is an essential metric for gauging the success of mobile advertising strategies at all levels, from the macro to the micro-level (marketing strategy, campaign, targeting, and ad).
Most SaaS marketers want to assess ROAS so they can have a better idea of how effective their advertising initiatives are. This is determined by subtracting the cost of operating these ad campaigns from the total income that was generated by the advertisements. Insights from ROAS, when combined with the worth of a client across their whole lifespan, will provide you with a picture of what your future marketing plan and budget will look like.
ROAS formula to determine the marketing is as follows:
ROAS = (revenue attributable to ads / cost of ads) x 100
Consider the following scenario: you spend $1,000 on an ad campaign that ultimately generates $3,000 in profit. When calculated with the ROAS formula, a ROAS of 3 is excellent.
When figuring out how much money is spent on advertisements, ROAS calculations get more involved and necessitate a few choices. First, you'll need to settle if you want to keep tabs on total spending across all platforms or if you also want to include things like general advertising costs. Here's an illustration:
1. Advertising campaigns typically incur vendor charges in the form of commission fees charged by the vendors you deal with.
2. Campaigns require a team, so fees will be associated if they're set up in-house or outsourced to a third party.
When figuring up your ROAS marketing calculations, the term "cost of ads" will have different meanings depending on the kind of campaign you're conducting. In these cases, it's best to focus entirely on the complex numbers associated with advertising and develop a unique Return on Ad Spending (ROAS) that accounts for any and all indirect expenditures. This will allow you to monitor the success and profitability of any campaigns where ROAS is a key performance indicator.