ROAS stands for Return on Ad Spend and is a simple metric to describe how much revenue you get out of your spent advertising budget. To run a profitable ad campaign/business the ROAS, of course, has to be positive (>100%). A good ROAS would be considered between 200% and 500%. Over 800% is a really excellent performance.
The ROAS formula explained
If you spent $1,000 on ads and generated $5,000 in revenue with a 20% profit margin:
Total Profit = (5,000−1,000)×0.20=800(5,000 - 1,000) \times 0.20 = 800(5,000−1,000)×0.20 = 800
ROAS = (5,000/1,000)×100=500%(5,000 / 1,000) \times 100 = 500\%(5,000/1,000)×100 = 500%
Input fields in our ROAS calculator
Our ROAS calculator needs these fields as inputs:
- Total Ad Spend: The amount spent on the ads.
- Revenue from Ads: The revenue generated from these ads.
- Profit Margin: The profit margin percentage, allowing the business to see actual profitability.
An alternative way to look at the efficiency of a marketing investment is the ROI, which is per definition a broader metric, as it considers all investments compared to its return.