AdParlor Academy Paid Digital Glossary

Plain language explainers to help you keep up with the evolving digital landscape.

Return On Ad Spend (ROAS)

What is ROAS?

ROAS stands for "Return on Ad Spend." This is also sometimes referred to as ROI for “Return on Investment.” It measures the revenue generated for every dollar spent on advertising. ROAS is a crucial metric in evaluating the effectiveness of ad campaigns and assessing their contribution to overall business revenue and profitability.

How to measure ROAS?

ROAS is calculated by dividing the total revenue generated by advertising (attributed to specific campaigns or channels) by the total ad spend and multiplying by 100 to get a percentage.

For a dollar value: ROAS = (Total Revenue from Ads) / (Total Ad Spend)

For a %: ROAS = (Total Revenue from Ads) / (Total Ad Spend) * 100

Example: If an ad campaign generates $10,000 in revenue from a $2,000 ad spend, the ROAS would be $5 or 500%.

Why is ROAS important to marketers?

ROAS helps marketers determine the profitability of their advertising investments and allocate budget effectively across different campaigns and channels. A high ROAS or ROI indicates that the advertising efforts are generating significant returns, while a low ROAS may signal the need for adjustments to improve campaign performance.

Who needs to know what ROAS is:

  • Digital marketers
  • Content marketers
  • Email marketers
  • Paid search marketers
  • Social media marketers
  • Conversion rate optimizers
  • Web designers
  • Product managers
  • eCommerce businesses
  • SaaS companies
  • B2B companies
  • B2C / D2C companies

Use ROAS in a sentence:

The marketing team analyzed the ROAS of their advertising campaigns to identify the most cost-effective channels and optimize budget allocation for maximum return on investment.