ROAS: Everything you need to know about the key figure

In a nutshell: What is ROAS?

ROAS is the abbreviation for Return on Advertising Spend or Return on Ad Spend. It is one of the most important key figures in online marketing. In e-commerce in particular, ROAS is a popular method for finding out how successful marketing measures are.

ROAS can be used to determine the success of Google Ads, Facebook Ads and other advertisements.

Definition of ROAS: A key figure for determining the success and failure of ads

The ROAS (Return on Advertising Spend) provides information about which of your advertisements are worthwhile and which are less successful. This provides you with valuable information about whether an ads campaign is worthwhile or not.

With the help of ROAS, you can control advertising expenditure in a targeted manner, as advertising that is not worthwhile can be easily identified.

ROAS is used for Google Ads campaigns as well as for advertising measures on social networks and other platforms.

Im Grunde profitiert jeder, derOnline-Marketing betreibt, von dieser Kennzahl. Besonders populär ist seine Verwendung jedoch im E-Commerce.

Knowledge of ROAS is now one of the SEO basics that you should familiarize yourself with sooner or later.

What do I need the ROAS (Return on Ad Spend) for?

As a key figure in online marketing, ROAS provides you with valuable information. As a first step, you can use it to determine whether your advertisements achieve any conversions at all.

Diese Conversion-Werte sind ein erstes Indiz dafür, ob sich eineAnzeige lohnt oder nicht.

It is particularly important to know which of your advertising measures are successful and which are not. And, of course, the ratio of sales to advertising expenditure. This is the only way to determine whether an ad is worthwhile.

If you know the ROAS of an ad, you can better decide whether to increase or decrease advertising spend.

The key figure is also a practical form of keyword analysis. You can simply discard keywords that are not relevant.

ROAS is therefore an excellent key figure for optimizing your advertising. This provides the basis for increasing efficiency.

How the key figure works: How the ROAS is calculated

For the ROAS to be as meaningful as possible, you need these two values:

the revenue generated by the ad (conversion value)
the advertising costs (Adspend)

They are set in relation to each other. To calculate the ROAS, divide the turnover by the advertising costs and multiply the result by 100. You have already calculated the ROAS for an advertising campaign as a percentage.

An example: You achieve a turnover of 25,000 euros through a campaign. The advertising costs for this amount to 5,000 euros. Your ROAS is therefore 500 %. You therefore generate 5 euros in sales for every euro spent on advertising.

This allows successful campaigns to be differentiated from less successful measures.

The ROAS is usually always calculated for a fixed period of time. For example, you measure the ROAS value for a month or a quarter. Accordingly, only the figures for this period are used to calculate the ROAS.

ROAS vs. ROI: What are the differences between the two key figures?

Im Online-Marketing werden die Begriffe ROAS undROI (Return on Investment) gerne gemeinsam verwendet. Während der ROAS-Wert nur den Umsatz berücksichtigt, fließen in die Berechnung des ROI das Gesamtkapital und somit auch die Gewinnspanne ein.

The ROI value can therefore be negative despite a positive ROAS. It is therefore always worth calculating both key figures in order to obtain meaningful results. ROAS is only a subset of ROI.

Why is the return on advertising spend so important?

ROAS is essential for determining whether an advertising measure on Google or in social media is actually worthwhile. This enables you to measure the success of campaigns and initiate appropriate measures.

This in turn allows you to use your budget wisely.

Facebook and Google do offer their own metrics that you can use to evaluate and categorize your ads. However, the clicks are usually used as the starting value, which says nothing about the actual sales . Not every click becomes a conversion.

And even if you rely on conversion tracking for your ads, these values are not always meaningful. To really create a basis for optimization, you should calculate your ROAS.

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What is a good ROAS value?

For your ad to be profitable, its ROAS must be above 1 or 100% . Anything below this means that your expenses outweigh your income.

In general, the higher the ROAS value, the better.

In general, it is not possible to say which value is desirable. In some sectors, 400% is considered a benchmark, while others only speak of a profitable ad from 600%.

The ROAS can also be somewhat lower for digital products and services because no production costs are incurred. Physical products, on the other hand, require a higher value to make the ad worthwhile.

Your target ROAS should therefore be correspondingly high - with the option to keep improving it. After all, it provides you with precisely the information that will help you use your advertising budget more wisely and optimize your profits.

That's how meaningful the ROAS really is

Even if you should not do without calculating the return on advertising spend, there are a few factors to consider. First of all, you should always keep in mind that you calculate ROAS exclusively on the basis of your gross revenue.

Ein leicht positiver Wert reicht also nicht aus, um alle Ausgaben zu decken. Schließlich werden davon noch die Mehrwertsteuer und anderevariable Kosten abgezogen. Das können Herstellungskosten, Fulfillment-Kosten, Transaktionskosten, Provisionen oder Lizenzgebühren sein.

In addition, the ROAS does not take into account all those customers who become aware of an item in your product range for the first time via an ad and generate repeated sales in the following years. In such a case, the ROAS would be somewhat underestimated.

Somit gilt: Der ROAS lässtkeine vollständige Bewertung der Effizienz deines eingesetzten Werbebudgets zu, sondern konzentriert sich nur auf einen Teilbereich. Für ein ganzheitliches Bild ist die zusätzliche Betrachtung des Return on Investment nötig.

Distortion of the ROAS

Missing data can contribute to the ROAS not being as meaningful as it should be. This can happen due to cookie policies, for example.

The constant tightening of data protection guidelines means that the performance of advertisements cannot always be tracked properly.

Another distortion can occur in the high-price segment . If customers only buy one product that represents a very high turnover for your company, this can lead to missing data. After all, not many individual purchases are made.

Although the advertising expenditure is fully covered, the ROAS may be negative.

This means that the more data available, the more meaningful the ROAS is.

Conclusion: What is ROAS?

The ROAS (Return on Ad Spend) puts your turnover in relation to your advertising expenditure. You can calculate this key figure using a simple formula. This allows you to determine successful and less successful campaigns.

Das bildet die perfekte Basis für Optimierungen deiner Werbemaßnahmen, wodurch sich langfristig dein Gewinn steigern lässt. Für Unternehmen ist der ROAS somiteine der wichtigsten Kennzahlen.