Return on Ad Spend (ROAS)
The return on ad spend (ROAS) represents the ratio of revenue generated by an ad campaign to its cost. For instance, if a campaign costing $1,000 generates $10,000 in revenue, the ROAS would be 10:1. Unlike return on investment (ROI), which considers the overall value of a campaign, including non-monetary benefits like brand awareness, ROAS specifically focuses on the direct relationship between campaign revenue and cost.
Example
For example, Return on Ad Spend (ROAS):
Let’s say a company spends $5,000 on a digital advertising campaign promoting a new product. As a result of the campaign, they generated $25,000 in revenue directly attributed to the ads. The ROAS would be calculated as follows:
ROAS = Revenue / Ad Spend
ROAS = $25,000 / $5,000
ROAS = 5:1
> This means that for every $1 spent on advertising, the company earns $5 in revenue.