[et_pb_section fb_built=”1″ _builder_version=”4.21.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_row _builder_version=”4.21.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.21.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text admin_label=”Introduction” _builder_version=”4.27.4″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n
ROAS, or return on ad spend, can range from 1.55 to 9.10 on average depending on the channel (First Page Sage<\/a>). Without context, that statement is probably confusing. Are those figures dollars? Percentages? What do they even mean and why do they matter?<\/p>\n These are questions any agency offering digital advertising services<\/a> must be able to answer. Keep reading to better understand ROAS and get some practical tips on how to compute ROAS and discuss it with your clients.<\/p>\n [et_pb_section global_module=\"113232 \"][\/et_pb_section]<\/span><\/p>\n [\/et_pb_text][et_pb_text admin_label=”Understanding ROAS” _builder_version=”4.27.4″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n Agency teams must understand a variety of return on investment metrics, including ROAS. This lets them communicate clearly with clients and demonstrate the value and effectiveness of their services.<\/p>\n ROAS measures how much revenue is generated for every dollar you spend on advertising. Keeping track of ROAS can help you understand the effectiveness of your digital advertising efforts, since this metric is technically a specific type of return on investment (ROI) metric.<\/p>\n You can measure ROAS as a whole\u2014the total return on all ad spending for a client, and you can also measure it for specific campaigns or platforms, such as the ROAS for Facebook ads<\/a>.<\/p>\n Tracking ROAS lets you:<\/p>\n When you understand the ROAS formula and can accurately track this metric, you and your clients can experience the following benefits:<\/p>\n [\/et_pb_text][et_pb_text admin_label=”How to calculate ROAS” _builder_version=”4.27.4″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n The ROAS formula itself is pretty easy to understand and remember. It involves dividing the revenue generated in relation to ad campaigns by the total cost of those campaigns. Specifically:<\/p>\n Return on ad spend = Ad-Related Revenue \/ Total Ad Spend<\/em><\/p>\n You can find return on ad spend calculator options online that do the math of this formula for you. However, once you get to the basic formula, you can easily do that math yourself too.<\/p>\n The bigger challenge is in arriving at accurate variables to feed into the formula for ROAS. The first number\u2014total ad spend\u2014is fairly easy. You should obviously track the amount you spend on ads for any campaign, client, or effort, so you likely have that figure easily available.<\/p>\n Ad-related revenue, which is also called conversion revenue, can be more difficult to calculate. To arrive at this figure, you must accurately attribute conversions and revenue to specific ad campaigns.<\/p>\n This involves leveraging comprehensive marketing attribution\u2014an effort that takes a lot of collaboration between you and your client<\/a>. If anyone within the process fails to consistently attend to details or sets up attribution incorrectly, your ROAS calculation won\u2019t be correct. Integrating automation to capture marketing attribution and other data as much as possible is often the best way to support consistent accuracy for these figures.<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Use cases for reporting on ROAS” _builder_version=”4.27.4″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n Once you know how to compute ROAS and understand that it can take a bit of work, you may want to know when to push for this number. Here are a few common use cases for reporting ROAS within your agency and to your clients.<\/p>\n When you report accurate ROAS to clients, they can better allocate advertising budgets, making decisions to funnel more funds into efforts that perform better. They can also consider whether low-performing campaigns have a purpose other than driving revenue and make the educated decision to continue funding those efforts despite a lower ROAS if desired.<\/p>\n Whether you\u2019re working within the bounds of a PPC reseller program<\/a> or managing ads for your own agency, budget allocation is critical. It helps businesses keep ad budgets within appropriate control while maximizing returns.<\/p>\n ROAS provides a fast way for businesses to evaluate the performance of advertising on various channels. With so many platforms available, clients may be tempted to invest in Facebook, Instagram, Twitter, YouTube, Bing, and Google Ads management<\/a>\u2014not to mention many others. ROAS helps them compare performance and choose the platforms that work best.<\/p>\n While multichannel marketing is extremely effective\u2014as you likely know if you engage in both SEO and PPC management<\/a>\u2014businesses can spread themselves and their ad budgets too thin if they try to show up everywhere. Small and midsize businesses, especially, may need to monitor ad spending and do the most they can with the resources they have. Peppering ads across the entire landscape of the World Wide Web doesn\u2019t achieve that goal.<\/p>\n It\u2019s also not super effective for companies to do this even if they have the resources to attempt it. Businesses of all sizes\u2014with the help of their marketing agencies\u2014should work to discover the platforms where ads drive the most connection and conversions. For example, a business targeting older adults with a medical app would probably do better with Facebook ads than with Snapchat or TikTok ads\u2014and ROAS can quickly confirm whether that\u2019s true.<\/p>\n Whether you\u2019re using white-label PPC services<\/a> or collaborating closely with clients to create ads together, ROAS can support continuous improvement in ad elements. You can run ads with different creative elements and check the ROAS of each ad set to understand what is more effective.<\/p>\n Here are some elements you can use ROAS to test and verify:<\/p>\n <\/p>\n Using A\/B testing with ROAS as a performance indicator, you can continuously tweak ads to drive better performance and more revenue.<\/p>\n Digging into ROAS figures, you can better understand how ad campaigns are performing across various audience segments<\/a>. This lets clients make educated decisions about how to best segment their target audience and how to approach ads for each segment.<\/p>\n ROAS also helps clients identify high-value audience segments that seem to drive more revenue than others. This information can help clients create important new marketing and ad campaigns but also provides feedback that might be useful in future product development or the creation of customer loyalty programs.<\/p>\n Here are a few basic examples of how ROAS can help your clients make informed decisions about audience segmenting:<\/p>\n Because ROAS is a subjective, trackable, and consistent measure of ad success\u2014as long as it\u2019s recorded accurately\u2014it allows businesses to track advertising performance over time. Even as a business scales, ROAS tells a consistent story because it divides revenue by ad spend.<\/p>\n For example, a business might start out spending $100 monthly on ads. Five years later, it\u2019s grown and can afford to spend $5,000 monthly. You would expect that its revenue has also scaled, so ROAS doesn\u2019t necessarily go up or down simply because the spend does. Your clients can, therefore, compare ROAS from last year to ROAS this year to determine whether ad performance has increased.<\/p>\n ROAS figures can be an important part of determining the overall return on investment of advertising and marketing efforts. You can use this figure alongside other important business metrics, such as the cost of goods sold, to help clients understand whether their ad budgets are appropriate<\/a> and what they are getting in return for that spend.<\/p>\n [\/et_pb_text][et_pb_text admin_label=”Tips for presenting your ROAS findings to clients” _builder_version=”4.27.4″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n As an agency, the most accurate ROAS calculation you can possibly arrive at does little good if you\u2019re not presenting the metric to clients in a way they understand. Remember that many of your clients aren\u2019t digital marketing experts, and they likely aren\u2019t familiar with the types of metrics and analyses that go into making strong PPC ad decisions. Start off by educating clients about ROAS and other important considerations.<\/p>\n Next, think about ways to discuss ROAS that add value for the client. That can range from using ROAS to help clients make choices that improve their online advertising efforts to using ROAS as a way to ensure clients understand the effectiveness of the services you provide.<\/p>\n Clients might become overwhelmed or confused when presented with columns full of numbers and a lot of marketing speak\u2014even if they are fairly well-versed in digital marketing concepts. Visuals such as charts and graphs help to clarify the meaning behind metrics and can help you create a narrative the client can understand and analyze.<\/p>\n Here are a few ideas for using visual data tools to present ROAS findings to clients:<\/p>\n Another way to help clients demystify ROAS is to present it with plenty of context. Clients may not really understand that their ROAS is excellent\u2014it\u2019s just a random number to them. But when you show their ROAS next to industry benchmarks or past performance for their own business, they can more clearly understand what a good ROAS really is or how your campaigns have improved performance.<\/p>\n Ensure your clients know exactly how you handle ROAS calculations. Provide them with the formula and a list of all the attributes you used to calculate ad spend as well as conversion revenue. Create a flowchart or decision tree that helps clients understand how you attribute revenue to specific ad campaigns.<\/p>\n When clients understand the methodology behind the ROAS metric, you may enjoy several benefits:<\/p>\n <\/p>\n Make sure you\u2019re transparent about serious limitations in your ROAS calculations. For example, let clients know if you\u2019re unable to attribute whether revenue comes from local SEO or SEM marketing<\/a> with 100 percent accuracy.<\/p>\n Chances are that your clients didn\u2019t hire you simply to track and present metrics. They hired you for your experience in digital marketing strategy<\/a>. Whether you\u2019re providing additional ad services via an option like Vendasta\u2019s white-label PPC services<\/a> or not, always provide more than numbers to your clients.<\/p>\n When discussing ROAS, you might also provide:<\/p>\n [\/et_pb_text][et_pb_text admin_label=”ROAS Calculation FAQs” _builder_version=”4.27.4″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n ROAS calculation shows how much revenue a client earns for every $1 spent on ads. It\u2019s a direct way to connect ad spend to business results.<\/p>\n ROAS = Ad-related revenue \u00f7 Total ad spend. Revenue you can attribute to specific campaigns, ad sets, or channels through conversion tracking and attribution rules.<\/p>\n All platform spend tied to the campaign (and sometimes fees, depending on how you define ROAS for the client). Always document what\u2019s included.<\/p>\n It translates performance into money. That makes it easier to defend budgets, explain results, and justify next steps.<\/p>\n Bad attribution setup, missing conversion tracking, wrong revenue values, and mixing platforms or time ranges that don\u2019t match.<\/p>\n Different windows change which conversions get credited. A longer window can increase attributed revenue and raise reported ROAS.<\/p>\n It shows which campaigns or channels produce more revenue per dollar, so you can shift spend toward higher-performing efforts.<\/p>\n You can compare ROAS across ad variations and segments to see what drives real revenue, not just clicks or engagement.<\/p>\n Be clear that ROAS depends on attribution accuracy and may not capture the full impact of SEO, offline sales, repeat purchases, or multi-touch journeys unless you track those deliberately.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" When should you use ROAS and how do you calculate it? Learn how to compute return on ad spend now.<\/p>\n","protected":false},"author":103,"featured_media":121943,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[48],"tags":[133],"class_list":["post-84644","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-marketing","tag-digital-advertising"],"acf":[],"yoast_head":"\nUnderstanding ROAS<\/h2>\n
What is return on ad spend (ROAS)?<\/h3>\n
Why is it important to track ROAS?<\/h3>\n
\n
How does ROAS bring value to you and your clients?<\/h3>\n
\n
How to calculate ROAS<\/h2>\n
Getting to the variables for the ROAS formula<\/h3>\n
Use cases for reporting on ROAS<\/h2>\n
Budget allocation<\/h3>\n
Channel comparison<\/h3>\n
Why not launch ads everywhere for more exposure?<\/h4>\n
Ad creative analysis<\/h3>\n
\n
Audience segmentation<\/h3>\n
Examples of how ROAS helps with audience segmentation<\/h4>\n
\n
Long-term performance tracking<\/h3>\n
ROI calculations<\/h3>\n
Tips for presenting your ROAS findings to clients<\/h2>\n
Use visual data tools<\/h3>\n
\n
Provide context and benchmarks<\/h3>\n
Explain methodology and limitations<\/h3>\n
\n
Identify insights and recommendations<\/h3>\n
\n
ROAS Calculation FAQs<\/h2>\n
1. What is ROAS calculation?<\/h2>\n
2. What is the ROAS formula?<\/h2>\n
Example: $5,000 revenue \u00f7 $1,000 spend = 5:1 ROAS.<\/p>\n3. What counts as ad-related revenue in ROAS calculation?<\/h2>\n
4. What counts as total ad spend in ROAS calculation?<\/h2>\n
5. Why is ROAS calculation important for client reporting?<\/h2>\n
6. What are the most common ROAS calculation mistakes?<\/h2>\n
7. How do attribution windows affect ROAS calculation?<\/h2>\n
8. How can ROAS calculation help with budget allocation?<\/h2>\n
9. How can ROAS calculation support creative and audience testing?<\/h2>\n
10. How should agencies explain ROAS calculation limitations to clients?<\/h2>\n