In order to make money as an advertiser, you have to be able to measure your success and work out what campaigns, promotions or partnerships are working for you and which are failing.
ROAS is an acronym for “Return on Advertising Spend” and an important key performance indicator in online marketing.
ROAS calculates how much you will need to spend on an advertisement campaign in order to generate a certain amount of revenue. Knowing this is useful for many reasons-it helps to ensure that you don’t waste time and money on things that aren’t making a profit, and lets you concentrate on growth areas-or alternatively, it shows you when something isn’t doing well and may need more work.
A simple advertiser marketing ROAS example
Say you spent $20 on a campaign and made $100 back from it. Divide the 100 income from the 20 spend, which gives you 5, or a ROAS ratio of 5:1, or 500%. This means that for every dollar you spent on the campaign, you got $5 back.
What ROAS is considered good?
An acceptable ROAS will differ from company to company depending on their profit margin, their operating costs and the overall health of their business. Some companies may barely get by with a Return on Ad Spend of $10:$1, while others might flourish with a ROAS as little as $2.5:$1.
A common ROAS benchmark that most companies strive to meet is $4:$1. At this ratio, the ad campaign is not only effective, but also generating good revenue.
Understanding how ROAS works for you and how to apply them to work out your profit levels as well as the actual profit will help you to fine-tune your endeavors to maximize your income, and build upon your success without throwing money away on promotions that are not paying off.
By working with our team we will work to understand how you generate revenue in your app and ensure we are placing events in those actions to watch the user journey after the install.
So To Review:
If you’ve determined that there’s room for improvement after calculating the ROAS, here are a few tips to consider implementing:
• Remember to allocate resources to the campaign. To better cater to customers, tailor each ad campaign to the right audience and specifically outline the benefits and features of each product.
• Focus on the right metrics. To calculate the ROAS and the effectiveness of each ad campaign and its Return on Investment (ROI), you’ll need to analyze key metrics to determine what the conversion rate of each ad is, the amount of sales that are generated, among other factors.
• Focus on one source at a time. Focus on one source at a time regardless of whether you’re interested in performance marketing or in-house marketing.
• Better define the rules and policies. Build a strong and better relationship with sources and advertisers by establishing clear rules and policies. Establishing expectations early on will yield better results