# What is Return On Ad Spend (ROAS) and how to calculate it?

• Return on investment (ROI)
• Click-through rate (CTR)
• Cost per conversion (CPC)
• Amount of clicks
• Paid website traffic

While each of these metrics has value, the best way to truly understand the efficiency of a specific ad or campaign is return on advertising spend (ROAS).

## What is Return On Ad Spend (ROAS)?

Simply put, return on advertising spend (ROAS) is the profit you gain from each euro, dollar, or pound you spend on advertising. Your ROAS score offers you a simple way of analysing the performance of a given advert in clear financial terms. In other words, it shows you how much you get from the money you put into your advertising.

## How do I calculate ROAS?

To work out the ROAS for any advertising campaign, you need to know two values:

2. the money you spent on the ad or campaign.

Then, you take the revenue and divide it by the money spent. The resulting number shows you the amount of money you gain from every single unit put in, like one dollar, euro, or pound. Here is the ROAS formula:

Revenue (€ / £ / \$) / Ad spend (€ / £ / \$)= Return on ad spend

For example, if you spent €1,000 on an ad campaign and made €2,000 in revenues, you would use this formula to give you a ROAS of 2:

Revenue (€2,000) / Ad spend (€1,000) = ROAS of 2 (or 2x, 200%, 2:1, or €2)

The above shows that you make two times as much profit as a result of each unit of currency you put into your advertising. The ROAS score can be expressed as a multiplier (2x), a percentage (200%), a ratio (2:1), or a currency amount (€2).

## Why is ROAS important?

Overall, ROAS lets you see the effectiveness and quality of your adverts and shows you where you need to improve. It can help you avoid unnecessary ad spending or increase the revenue from a particular campaign. It is important to note that ROAS only gives you data for a specific ad campaign: it cannot tell you about the profitability of your products or company.

By continually fine-tuning your advertising copy and visuals, you can make sure you are engaging your audience and showing them the actual value of your product or service. All of this while trying to convert them or tempt them to find out more about your company. From a detailed approach with A/B testing to simply rewriting and redesigning an entire campaign from scratch, turning more prospects into converts is a clear method of improving your ROAS.

For paid advertising campaigns, adjusting the details can help improve your ROAS. By taking steps like focusing your budget on a particular market segment or adding more negative keywords so you can exclude irrelevant search terms from your campaign, you can reduce wasted ad spending. As for increasing ad revenue, there are many ways to do that. For example, you can boost your conversion rate by reducing the steps needed to complete a purchase in your store, making sure the route is clear.