Return On Advertising Spend, (ROAS), is a marketing methodology to measure the success of a digital campaign or project. It can be used standalone or as part of Test, Measure and Scale.
An example of ROAS might be displayed as 3 : 1
e.g. for every $1 you invest you could expect $3 back
On this web page we primarily review ROAS using Pay per Click (PPC)
Why you need ROAS
ROAS provides a formula for owners, stakeholders, webmasters to calculate stock levels, cash flows, investment capex.
ROAS provides a target for webmasters, agencies and freelancers to build campaigns that rely on finite resources e.g. stock, hours, size of audience.
ROAS helps to assess weak points in offer, conversion, product/service and process.
Service providers and agencies most likely need ROAS (more than they think) because it provides accountability for service delivery and is increasingly asked for as part of a service level agreement (SLA) or Key Point Indicator (KPI) with a bidding round, tender, proposal, etc.
Before calculating your own ROAS you should try to consider reviewing industry, peers and competitors. We recommend reviewing SpyFu for this purpose.
Not all campaigns will be successful, but there are some rule of thumbs you can rely on to make initial decisions on keywords :
- Succesful PPC campaigns typically run for months or years, this can help strike off those who are in test and measure phases.
- Succesful PPC campaigns have multiple adverts and platforms focusing on tightly groups campaigns and keywords.
- Succesful PPC campaigns have a conversion rate that is pertains to reaching the ROAS target
Not all ROAS expectations will work. Clients can be demanding, it’s worth noting :
- ROAS is sector dependent
- ROAS can be hypersensitive to region, town, product, season, etc
- ROAS can be lost through indirect changes to the platform
- ROAS can be lost through indirect changes to the algorithm
- ROAS should be monitored frequently
If you are reporting ROAS and ROI then both SpyFu and Agency Analytics are both very useful branded / white label reporting SaaS that can help your agency or service report monthly, weekly, etc on activity and deliver day to day, business as usual (BAU) actions.
Occasionally there is a hesitancy for service providers to accept a request for ROAS and quite often it is with good cause, ROAS implemented too early can put stress and strain on a commercial relationship if the timing is incorrect.
- Have you completed a test and measure phase
- Has any one campaign reached profitability yet
- Is there historic YoY data or are future seasons unmapped
- Is the requirement for a substantial jump in ROAS warranted
- Is there a sufficient audience to achieve your projected ROAS
Agencies and freelancers want your business to be successful so if they are hesitant or raise issues with your ROAS requirements then it’s well worth listening to them, it likely they have valid concerns rather than any limit to their team’s personal performance delivery.
ROAS and ROI
In-house or agency reporting it’s well worthwhile using tried and tested reporting software rather than a DIY approach. Agency Analytics provides a comprehensive reporting tool designed to track, measure, and report on campaigns.
- Report and automatically pull in all of your client data across multiple PPC networks like Google Adwords, Bing Ads, Adroll, and Facebook Ads
- Track and monitor a wide variety of important KPIs across every PPC channel. Analyse clicks, impressions, CTR, conversion rate all the way down to ads and keywords
- Graph any KPI with a single click to visualise performance
- Reports include prominent ROI metrics as well as a dedicated conversions section
- PPC reports make it easy to compare historical performance and showcase improvement month over month
- ROAS, showing your markup in all client visible PPC reporting
Held at the core of any ROAS and ROI plan is the initial data gained from :
1st party: your own sources such as Google Analytics Goals and other tracking software.
3rd party: intelligent assessment of your competitors share of voice, ad budget, use of platforms, etc
The latter is most important, especially if you do not have accurate data or have been marketing your business to date.
We recommend SpyFu, a US and UK repository, tracking and evaluating competitors’ ad spend, campaigns, and keywords.