What is ROAS? How to Calculate & Apply to your Business

What is ROAS? How to Calculate & Apply to your Business

Return on ad spend (ROAS) plays an important role in online marketing as it indicates the amount of income that is earned for every dollar spent on a campaign. Similar to the return on investment (ROI), ROAS represents the profit achieved for each advertising cost and can be measured both on a high level and on a more grainy basis. Whether you want to calculate ROAS for a complete marketing strategy or focus on performance at the campaign, targeting, or ad level, then it is the best source for measuring and determining strategic success in advertising. However, roas calculator by calculator-online.net is basically designed to calculate the revenues earned for each dollar you spend on advertising.

If you have your own business and you want to market its products or services instantly and spread the word in a relatively less amount of time, paid marketing is the way to go. Remember that to spend money on paid advertising can turn out to be a costly affair that depends on when, where, what, how, and who you are marketing to. Therefore, this makes it significant to calculate Return on ad spend (ROAS) also termed as ‘return on ad spend.’You can use this roas calculator online to determine the ROAS for your business.

Why is Return On Ad Spend (ROAS) important for business?

The term “Return On Ad Spend (ROAS)” is essential for any marketing team and the business owner. This will help you to understand whether the advertising strategy works or not. Generally, the aim of most advertising campaigns is looked towards traffic and clicks, and most significantly to make income for the business. It depends on what you can measure using the ROAS. The entire advantage of calculating ROAS for your business is to help you understand the amount of revenue your ad is generating for your business. In this regard, you can use roas calculator online for free. 

How do you calculate return on ad spends? 

Typically, return on ad spend (ROAS) is calculated as follows:

ROAS = Revenue attributable to ads / Cost of ads

For example:

In case you invest $100 into your ad campaign and make $250 in revenue from those ads, then your ROAS is calculated as 2.5.

Other ways to Calculate the Cost of Ads:

There are some other ways to determine the cost of ads for your business. You may desire to follow just the actual dollar amount that you spent on a specific ad platform, whereas sometimes you may want to include additional advertising costs. These are: 

Salary Costs: 

The cost of in-house or contracted people who maintain the ad campaign.

Vendor Costs: 

These include fees as well as commissions from vendors that ease the ad campaign.

Affiliate Costs:

This can involve individual affiliate commissions and any affiliate network fees.

Generally, it depends on the type of ad campaign that you’re running, it is sometimes useful to estimate the ROAS entirely based on ad costs, and a separate ROAS that involves these additional advertising expenses to obtain a more complete image of the campaign’s profitability.