As an advertiser, there are several metrics you need to track to determine the effectiveness of your campaigns. One of the key metrics you need to track is ROAS. But what is ROAS, and why is it important to your business? According to experts from places like AppsFlyer, ROAS is arguably the most important metric for marketers. This article will explore why.
What is ROAS?
ROAS stands for return on ad spend. It’s a marketing metric that measures the amount of revenue generated for every dollar spent on an advertising campaign. ROAS is similar to return on investment (ROI), but it focuses on the ROI of money spent on digital advertising.
Conversely, ROI covers a wider scope. For example, you would use it to track other marketing expenses, such as hiring graphic designers coupled with money spent on ads.
You can calculate ROAS using the following formula:
ROAS: Gross revenue from ads / Cost of the Ad campaign
For example, if you generated $500 in revenue from a campaign that cost you $100 to run, then your ROAS would be 5:1. That means for every $1 you spent on advertising; you made $5.
Generally, the more effective your campaign is, the higher your ROAS will be. So how can you maximize your ROAS? Here are three ways you can boost your ROAS and make the most of your ad spend.
Lower Your Ad Cost
Spending less on ads is the simplest way to improve your ROAS. While ad costs depend on various factors, here are some strategies you can use to reduce your ad costs:
- Target a specific audience: Narrowing your audience can help you reach more relevant prospects and help improve your ROAS. For instance, on Facebook, you can narrow your target audience by defining it based on demographics like location, age, gender, and more.
- Use appropriate keywords: When running Google Search ads, use relevant keywords related to the service or product you’re selling to avoid wasting your ad budget. Also, consider using negative keywords so that your ads don’t appear on searches not related to your product or service.
- Lower labor costs: If you’re working with a pricey ad agency, you could reduce your labor costs by working with a freelancer or an in-house team instead.
Maximize Your Ad Revenue
While lowering your ad costs is an excellent and simple way to improve your ROAS, you can also maximize the revenue generated by your ads by doing the following things:
- Reevaluate your keywords: Conduct thorough keyword research to refine your keywords. Try targeting long-tail keywords with less competition and substantial traffic to make your ads more competitive.
- Change your bidding strategy: If you’re running a campaign on Google Ads, consider using Google’s automated bidding strategies like setting a target ROAS.
Check Issues Unrelated to Ads
Sometimes ads aren’t the only reason for a low ROAS. Besides ads, here are other potential reasons for a low ROAS:
- Ambiguous ad copy
- A poorly designed landing page
- Slow page speeds
- An unclear call-to-action (CTA)
If you’re experiencing any of these issues, address them to improve your ROAS. For example, if your ad copy is ambiguous, consider hiring a copywriter to assist you.
Ultimately, tracking and improving ROAS is crucial to measuring the success of your business.