What does ROAS mean?
ROAS, which stands for "Return on Ad Spend," is a simple way to measure how well your ad spend is working. It shows how much money you make back for every euro you spend on ads. Imagine you spend €100 on an online ad campaign and bring in €400 in sales thanks to that campaign. Then your ROAS is four, because you've recouped four times your investment. The idea behind ROAS is to understand whether the money you put into ads is worth it, by calculating how much profit you get out of it.
To calculate ROAS, divide the total revenue from your ads by their cost. If the revenue exceeds the cost, you have a positive ROAS, meaning you are making a profit on your ad spend. An ROAS of 1 means that you have exactly recovered your costs, while an ROAS of less than 1 indicates that you are losing money on your campaign. By looking at your ROAS regularly, you can quickly see which ads are performing well and which are not, so you can make adjustments as needed.
Companies use ROAS to optimize their ad campaigns and use their budgets as efficiently as possible. If you see that a particular campaign has a high ROAS, you know it's smart to invest more money in it. On the other hand, if a campaign has a low ROAS, you can consider improving it or moving your budget to more effective campaigns. ROAS is used not only to measure the performance of current campaigns, but also to plan future strategies so that companies can grow and get more out of their marketing budgets.
