E-Commerce Dictionary
Return on Ad Spend (ROAS)
Definition
A marketing metric that measures the efficacy of a digital advertising campaign.
Deep Dive
Return on Ad Spend (ROAS) is a crucial marketing metric that quantifies the revenue generated for every dollar spent on advertising. It's calculated by dividing the total revenue attributed to an ad campaign by the total cost of that campaign, often expressed as a ratio or a percentage. This metric serves as an immediate indicator of the effectiveness and profitability of digital advertising efforts, helping businesses understand which campaigns, channels, or ad creatives are performing best.
Examples & Use Cases
- 1A company spends $1,000 on a Google Ads campaign and generates $5,000 in sales directly from those ads, resulting in a ROAS of 5:1 ($5,000 / $1,000).
- 2An e-commerce brand tracks its Facebook ad campaigns and finds that a campaign for new arrivals yielded a ROAS of 300%, meaning for every $1 spent, $3 was earned in revenue.
Related Terms
Marketing ROIAd AttributionCustomer Acquisition Cost (CAC)