What is Return on Ad Spend?
Return on Ad Spend, or ROAS, is an important KPI for developers. ROAS refers to the amount of money a business earns back for each dollar spent on advertising and is a commonly used marketing term. It is designed to measure how effective a business’ advertising efforts are. A higher ROAS is the goal.
How does ROAS work?
A ROAS formula is the total conversion value divided by advertising costs. Here is how ROAS works:
- Your gross revenue from ad campaign / Cost of your ad campaign = ROAS
Here is an example:
Let’s say you spend $4,000 on an ad campaign this month, that resulted in a revenue of $12,000. In order to get your ROAS, you need to divide $12,000 by $4,000, which = $3. Your return on ad spend for the month was $3.
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