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Advertising

What is ROAS (Return on Ad Spend)?

The revenue returned by an advertising investment — ROAS = revenue ÷ ad spend.

Detailed definition

A ROAS of 3x = 3 TL of revenue for every 1 TL you spend. It should not be confused with ROI (ROI is net profit, ROAS is revenue). In e-commerce, a healthy ROAS is 3-5x. Sectors with low profit margins need 5-8x (once revenue is converted into profit, you still have to break even). A low ROAS can be acceptable when acquiring new customers, because it is balanced out by LTV.

Examples

  • 10K TL of advertising → 40K TL of revenue = 4x ROAS.

Related terms

CAC (Customer Acquisition Cost) The total cost of winning one new customer — CAC = marketing spend ÷ number of new customers. LTV (Lifetime Value) The total revenue a customer generates for the brand over their lifetime. A critical metric in subscription and e-commerce models. CPC (Cost Per Click) The advertising cost you pay for each click. It varies with the sector and the level of keyword competition. Performance Max (PMax) Google's AI-driven campaign type — it automates the whole inventory of Search, Display, YouTube, Shopping and Maps in a single campaign. Google Shopping Ads E-commerce ads that appear in Google search results with a product image, a price and the brand.
From the same category

Other terms in the Advertising category

CAC (Customer Acquisition Cost) The total cost of winning one new customer — CAC = marketing spend ÷ number of new customers. Performance Max (PMax) Google's AI-driven campaign type — it automates the whole inventory of Search, Display, YouTube, Shopping and Maps in a single campaign. Google Shopping Ads E-commerce ads that appear in Google search results with a product image, a price and the brand. Lead Form Ads A format in which the user fills in the form inside the ad when they click it, without going to the site. Meta Pixel Meta's JavaScript code that tracks visitor behaviour on your site. Critical for audiences and conversion optimisation. CAPI (Conversions API) The method of sending conversion data to Meta from the server. The complement to the Pixel since iOS 14.5.
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