Glossary | R | Return on Ad Spend (ROAS)
What is ROAS?
Return on ad spend (ROAS) is an important key performance indicator (KPI) in mobile marketing. It refers to the earned revenue for the actual spent on a campaign. Whether you want to measure ROAS for an entire marketing strategy or look at performance at the campaign, targeting, or ad level, it’s a key metric for measuring and determining strategic success in mobile advertising.
Calculating ROAS: (revenue attributable to ads / cost of ads) x 100
The way you define ‘cost of ads’ in your ROAS calculation will depend on the type of campaign you’re running. Sometimes it’s most effective to work solely with the exact ad costs, and then create a separate ROAS that incorporates all collateral ad expenditure. This way you’ll have visibility on the overall performance and profitability of every campaign for which ROAS is a KPI.
Similarly, to the return on investment (ROI), it shows the profit achieved for each advertising expense and can be measured both on a high level and on a more granular basis.
ROAS and ROI: Return on investment (ROI) shows the profit achieved for each advertising expense (VS. revenue). When calculating an ROI, you’re looking at measuring the return on a particular investment relative to what the cost of that investment was. It’s a calculation of your net profit and the investment, with a formula that generally looks like this:
Calculating ROI: (Net profit / net investment) x 100
ROAS aims to help marketers determine the overall efficiency of mobile marketing campaigns by calculating the exact amount of money that is earnt from a campaign relative to the exact amount of money that was invested into it. One important takeaway is that a negative ROI can still be a positive ROAS, because your overall investment might be higher than the profit generated, but relative to the investment in the advertising campaigns themselves, the ROAS itself can be positive.