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Return on Ad Spend (ROAS) Definition
ROAS is a marketing metric that calculates the effectiveness of advertising spend by comparing revenue generated to ad costs. It helps advertisers understand profitability, optimize budgets, and evaluate campaign performance.
How Return on Ad Spend Works
- Total revenue from ad campaigns is calculated.
- Total ad spend is determined.
- ROAS = Revenue ÷ Ad Spend (expressed as a ratio or percentage).
- High ROAS indicates efficient, profitable campaigns.
Example of ROAS
An online retailer spends $1,000 on Google Ads and generates $5,000 in sales, achieving a ROAS of 5:1.
Why Return on Ad Spend Matters in Advertising
- Provides clear insight into advertising profitability
- Guides budget allocation and campaign scaling decisions
- Helps identify high-performing channels and strategies
- Essential for data-driven, ROI-focused marketing
