What is ROAS (Return on Ad Spend)?
Formula: (Revenue Generated from Ads / Total Ad Spend) × 100
Specifically measures the revenue generated per dollar spent on advertising. For example, spending $1,000 on Google Ads that generate $5,000 in sales yields a 500% ROAS. Essential metric for digital advertising campaigns. E-commerce companies like Wayfair and Chewy closely monitor ROAS across different ad platforms.
Improve ROAS through audience targeting refinement, ad creative optimization, and landing page testing. Focus on bid management, quality score improvement, and conversion rate optimization across campaigns.
ROAS benchmarks vary by industry and business model. Generally, a 4:1 ratio (400% ROAS) is considered good, but optimal targets depend on profit margins and business objectives.
ROAS specifically measures advertising effectiveness, while ROI considers total investment costs including operations and overhead. ROAS focuses on ad spend return, making it valuable for campaign optimization.
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