What is ROAS?
ROAS is the revenue earned from ad campaigns compared to the money spent on those campaigns, usually expressed as a percentage or ratio. It can also be used tod determine the efficacy of an ad or ad campaign, and help marketers determine how much much each advertising dollar should return in revenue. ROAS is a crucial metric in measuring mobile advertising performance, especially for marketers running mobile UA campaigns with UGC ads, video ad creative, and banner ads.
ROAS = (Revenue from advertising / Cost of advertising) * 100
For example, if you spend $100,000 on an ad campaign that returns $150,000 in revenue, then your ROAS = 150,000 / 100,000 = %150. Here's a handy website for calculating ROAS.
A higher ROAS indicates better campaign performance while low or negative ROAS signals a need to reassess creatives and campaign settings. A break-even ROAS is the point where advertising costs are covered, neither making a profit nor incurring a loss. It serves as a benchmark for ad spending alignment.
Some teams only measure the cost of their campaigns, while others factor in additional costs such as the cost of creative. Airtraffic saves marketers up to 60% in creative costs compared to similar agencies.
The advantages of using ROAS in mobile advertising include channel optimization, ad creative refinement, simplified reporting, and informed decision-making for future strategies. ROAS provides insights into what works and what doesn't, facilitating cost-effective planning. However, ROAS has limitations. It focuses on the short term, may not capture the holistic marketing mix, and lacks volume representation.