Return on advertising spend (ROAS) is a marketing metric companies use to measure an ad campaign’s effectiveness. It refers to the revenue a company earns for every dollar spent.
Detailed Explanation
ROAS is an essential key performance indicator (KPI) in marketing. It helps companies assess an ad’s performance and provides insight on how to improve future campaigns. Below is a simple formula to calculate ROAS.
ROAS = Gross revenue of ad campaign / Cost of ad campaign
For example, a company spends $3,000 monthly on its brand ambassador for a Facebook ad campaign. It earns $15,000 from the campaign. Its ROAS is as follows:
ROAS = $15,000 / $3,000 = $5 or 5:1
So the company earned $5 for every dollar it spent on sponsored ads.