What is Return on Ad Spend (ROAS) / Return on Investment (ROI)?
The ratio of the amount of revenue generated by an ad campaign to its cost. If you generated $10,000 from a campaign that cost $1,000, your return on ad spend (ROAS) would be 10:1. While similar to return on investment (ROI), ROAS is more focused on the hard cost of a campaign rather than on the overall value of running a campaign, which could include brand awareness or other marketing goals.
Example
A company spends $1,000 on an online advertising campaign and generates $5,000 in revenue directly attributed to the ads.
- ROAS: The ROAS is 5, meaning that for every $1 spent on advertising, the company earns $5 in revenue.
- ROI: After deducting all expenses, including the cost of goods sold, marketing expenses, and other operating costs, the campaign’s net profit is $2,500. The ROI is 150%, indicating that for every $1 invested in the campaign, the company earns $1.50 in net profit.