The Return On Ad Spend acronym ROAS gives an idea of the return associated with running a particular advertising campaign. In some cases, it is even possible to show the return rate for a specific, single creative. In simple terms, ROAS is the ratio of the revenue generated by an advertisement to its costs. It can be expressed in figures or percentages. ROAS, together with another indicator, ROI, helps to assess the profitability of advertising activities.
In relation to Google Ads and SEO campaigns, ROAS is an important performance indicator and enables you to optimise your advertising campaigns to achieve better results. In this article, we will look at what ROAS is, how it works and how it can be applied to Google Ads and SEO campaigns.
What is ROAS?
ROAS is a metric that measures how many dollars of revenue each dollar spent on advertising generates. The formula for ROAS is:
ROAS = ad revenue / ad cost
The ROAS value is always expressed as a percentage or as a number, e.g. ROAS 300% means that for every dollar spent on advertising, three dollars of revenue are generated.
How does ROAS work?
ROAS helps you make decisions about how to allocate your advertising budget. The higher the ROAS, the better the advertising campaign performs. A high ROAS means that the revenue generated by advertising is higher than the cost of advertising. This helps us to be sure that advertising expenditure is cost-effective and profitable.
ROAS allows us to compare the performance of different advertising campaigns and select those that generate the highest return on investment. This allows us to optimise our campaigns and increase the efficiency of the money spent.
ROAS in Google Ads campaigns
ROAS is particularly important in Google Ads campaigns. It allows us to measure the effectiveness of the campaign and increase its efficiency. In Google Ads, it is possible to set a target ROAS for a campaign, which makes it possible to automatically adjust the CPC rates (cost per click) depending on the ROAS value.
With a target ROAS, Google Ads will automatically adjust CPC rates to reach the target ROAS. For example, if the target ROAS is 300%, Google Ads will adjust the CPC rates to achieve 3 times the ROAS.
ROAS in SEO
ROAS can also be used in the context of search engine optimisation (SEO). For SEO, ROAS is a ratio that measures the profit associated with organic traffic to a website. For SEO, ROAS can be more difficult to measure than for Google Ads campaigns, as organic traffic is more difficult to track and attribute to a specific campaign. Nevertheless, several methods can be used to help calculate ROAS for organic traffic. In order to calculate ROAS for organic traffic, it is first necessary to determine the costs associated with positioning the website. These can be costs related to content creation, technical optimisation of the website, link building or other SEO-related activities. Then calculate the value of the organic traffic generated to the site. This can be done by measuring the value of sales or other indicators related to user interactions on the site.