Marketing 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 is calculated by dividing the total revenue attributed to an advertising campaign by the total cost of that campaign. Unlike broader metrics like Return on Investment (ROI), ROAS focuses specifically on the profitability of advertising efforts, providing a direct measure of how effectively advertising dollars are translating into sales.
Examples & Use Cases
- 1An e-commerce company spends $1,000 on a Google Ads campaign and generates $5,000 in sales, resulting in a ROAS of 5:1 ($5,000 / $1,000)
- 2A mobile app developer invests $500 in social media ads and sees $1,500 in in-app purchases directly attributable to those ads, yielding a ROAS of 3:1
- 3A SaaS company runs a display ad campaign costing $2,000, which leads to $8,000 in new subscription revenue, giving them a ROAS of 4:1.
Related Terms
Return on Investment (ROI)Cost Per Acquisition (CPA)Ad Impressions