What is Return on Ad Spend (ROAS)?
Return on ad spend (ROAS) is a marketing metric that measures the amount of revenue earned for every dollar spent on advertising. Similar to return on investment (ROI), ROAS measures the ROI of money invested into digital advertising. In addition to the overall ROAS of an entire marketing budget, it can be measured more granularly based on specific ads, targeting, campaigns, and so on.
How do you calculate return on ad spend?
Return on ad spend is calculated as follows:
ROAS = Revenue attributable to ads / Cost of ads
For example, if you invest $100 into your ad campaign and generate $250 in revenue from those ads, your ROAS is 2.5. (Hashtag: winning!)
There are several ways to determine the cost of ads. you may want to track just the actual dollar amount spent on a particular ad platform, whereas other times you may want to include additional advertising costs such as:
- Salary Costs: The cost of in-house or contracted personnel who manage the ad campaign.
- Vendor Costs: This includes fees and commissions from vendors that facilitate the ad campaign.
- Affiliate costs: This can include individual affiliate commissions and any affiliate network fees.
Depending on the type of ad campaign you’re running, it’s often useful to calculate the ROAS purely based on ad costs, and a separate ROAS that includes these additional advertising expenses to get a more complete picture of the campaign’s profitability.
Uses of return on ad spend
In the context of mobile marketing, ROI is among the most critical metrics for app advertisers. ROI is a global metric that measures an organization’s overall profits after all expenses, whereas ROAS allows marketers to measure exactly how much advertising is contributing to the bottom line.
Tracking ROAS across campaigns and ad platforms also allows marketers to measure, evaluate, and compare the effectiveness of their advertising efforts. As mentioned, ROAS can be broken down into the return on a particular ad platform, campaign, or ad, allowing marketers to evaluate where they’re achieving the highest level of profitability.
Before launching an ad campaign, it’s recommended to determine a minimum, acceptable, and target ROAS. BigCommerce highlights that there is no “right” answer to what can be considered a good ROAS as this will change based on the organization’s profit margins and other operating expenses. Typically, however, a common benchmark for an acceptable ROAS is 4:1, meaning for every $1 of ad spend you generate $4 in revenue.
A ROAS at that level not only provides ROI on your actual hard advertising costs, but also the associated costs we mentioned earlier: salaries, vendor costs, and everything else it takes to run a business.
By combining ROAS with other metrics such as cost per acquisition (CPA), cost per lead (CPL), and cost per click (CPC), advertisers get a more complete picture of the KPIs they need to hit in order to reach certain revenue targets. Looking at these PPC metrics more holistically can also provide an indication of traffic and lead quality from each ad source. For example, PPC Hero highlights that if you have a low CPL and a low ROAS, this indicates that the lead quality may not be sufficient for that campaign. Similarly, if you have a higher than average CPL but also a high ROAS, the leads may be more qualified than other channels, in which case your CPL benchmarks may need to be raised.
How Singular is using ROAS
In the context of mobile marketing, ROAS is among the most foundational KPIs to track. Among other networks like Google, Facebook, and TikTok, Singular tracks ROAS for mobile developers thousands of networks such as ironSource, AdColony, BlueStacks, and many more. Singular also enables ROAS tracking via Apple’s SKAdNetwork framework, which means that even if you don’t have an IDFA you can continue to monitor profitability on all your ad campaigns. In addition to data from SKAdNetwork, Singular aggregates ad costs and from all your media partners (and any data source) so that you can analyze complete and comprehensive ad spend and ROAS in a single platform. This means you can account for the ROAS of your entire marketing budget, regardless of the data source.
Calculating the true ROI of your ad campaigns can be a challenge if the business has multiple revenue streams and is using multiple ad platforms. With Singular’s ad monetization attribution, this allows you to automatically account for ad revenue in your ROAS formula. By combining ad attribution, other revenue sources, and cost aggregation, this provides advertisers with the true performance of each advertising channel and campaign. Ultimately, knowing the true performance of your ad campaigns at the most granular level enables better decision making and more intelligent scaling.
Finally, Singular’s ROAS analytics don’t end at the campaign level. The Singular platform also allows you to visualize performance of individual ad assets, including the performance metrics of videos and images side by side. Regardless of the source, our data connectors and attribution platform provide the true ROI of each campaign, publisher, creative, and keyword.
In summary, Singular provides mobile marketers with unrivaled ROI insights, including the ability to visualize creative assets side by side with their respective performance metrics, as well as granular analytics to get a comprehensive view of the organization’s ROAS.