For any business, calculating Return On Ad Spend (ROAS) is a key element. It drives business decisions related to marketing and advertising.
ROAS is a Key Performance Indicators (KPI) that play a role in measuring ad campaign success. It is mostly used by PPC Specialists & Digital Marketing Executives.Â
Despite being an Important Element In Advertising, many marketers still don’t have enough ideas about ROAS. Especially the beginners.Â
Questions like, What is ROAS? How to calculate ROAS? What’s the difference between ROAS and ROI? When should you use them? All these questions will be covered in this blog post.
Plus, PPC Managers at NME Digital Agency will share 3 practical tips to improve ROAS of both Google and Facebook Ad Campaigns.Â
Let’s start with understanding the Return-On-Ad-Spend (ROAS) with an example.
Understand ROAS With Example
ROAS is one of the Key Performance indicators in digital marketing. It is the revenue generated for every dollar spent on advertising. It showcases how the campaign is performing and helps businesses assess profitability and overall performance.Â
For example, the ROAS of 4:1 means that you are generating $4 on every $1 spent on an advertising campaign. This key metric helps you make informed decisions about where to allocate the budget for greater impact.Â
Low ROAS can indicate areas you need to optimise in these crucial elements of the campaign, such as ad copy, creative, and audience targeting.Â
On the other hand, better ROAS means these campaign elements are working well, which signals to increase the ad spend.Â
Comparing ROAS of different advertising channels helps you analyse the better-performing channels as well. So you can allocate advertising budget better way.
Remember: Things like product pricing, overall funnel health (email follow-ups, shipping, customer service), and offer strength also impact ROAS.
How To Calculate ROAS
The formula to calculate the return-on-ad-spend is simple:
ROAS = Total Revenue Generated From Ads / Cost Of Ads
For example, you’re selling a sports shoe via Facebook ads, the total revenue generated is $4000 on a spend of $1000, then ROAS would be 4:1
If you wish to calculate it in percentage (%), then multiply the final figure by 100. Then the above example would be:
ROAS = 4000/1000 * 100
ROAS = 400%Â
What Differentiates ROAS From ROI
ROI refers to the return on investment, the profit generated on the total investment. Calculating ROI involves measuring the return on a particular investment relative to the cost of the investment.Â
It is a calculation of Net Profit and Net Investment in the formula written as:
ROI = (Net Profit / Net Investment) * 100
Let’s say the Shoe Business generated a Net Profit of $400 on the investment of $2000, then the ROI will be:
ROI = (400/2000) * 100
On the other hand, ROAS is used to calculate revenue generated by ads, whereas ROI is used to calculate the return on investment.
Remember, negative ROI can still be a positive ROAS, because the overall invested amount could be higher than the profit generated from the ad.Â
The table below simplifies the difference between ROI and ROAS:
When ROAS & ROI Are Used?
Using ROAS or ROI is not an either/or scenario. Implementing both formulas to measure the effectiveness of marketing strategies is a best practice.Â
ROI helps you find the profit on the total investment, whereas ROAS helps you determine the contribution of the campaign to the ROI. Both elements have equal importance in every marketing campaign to calculate performance and effect.
How To Improve ROAS In Google & Facebook Ads
To boost ROAS of Google or Facebook ads, start with people who already know you, website visitors, past buyers, and social media engagers. These warm audiences can convert at lower costs and faster.
Next, scale using lookalike (Meta) or similar (Google) audiences to find new people who resemble your best customers. Always exclude past buyers so you don’t waste budget retargeting them.
For creatives and offers:
- Add urgency (limited-time offers, countdowns) to push quicker decisions.
- Retarget abandoned carts to recover missed sales.
- Use testimonials to build trust instantly.
- Simplify landing pages with one offer, one clear CTA.
Key takeaway: Focus on warm audiences first, expand smartly, and keep your messaging sharp and simple to maximise every advertising dollar for a better return.
Conclusion
If you’re reading the blog to the bottom, all doubts about ROAS may be answered. If you have questions or need assistance to improve your business ROAS, connect with our PPC Managers at NME Digital Agency.
They evaluate the loopholes in your Facebook and Google ad campaigns and help build strategies to better ROAS and ROI for your business.
To start, either dial us at +61 380 017 288 or contact us here.Â
