Home E-commerce university ROAS – why should you measure this KPI?

# ROAS – why should you measure this KPI?

#### What is ROAS?

The return on advertising expenses, or ROAS (Return on Ad Spend), is a term used in the advertising world to estimate the profits generated by advertising campaigns. Simply put, ROAS helps in calculating the return on advertising expenses.

#### How to calculate ROAS?

$$ROAS = \dfrac{income\: from\: advertising\: campaign}{cost\: of\: advertising\: campaign}$$

For example, if you spent £100 on an advertising campaign and thanks to it you sold products for a total of £1 000, ROAS will be 10.

How to interpret this result? In this case, the ad generated 10 times more revenue than the campaign cost.

You can calculate ROAS for ads on a given channel, in a specific campaign, for a group of ads or even individual keywords.

The detail of the analysis depends on the purpose of the campaign you have to implement. The company’s general and operational costs, margin and general e-commerce condition also influence this ratio.

#### Why is it worth to measure ROAS?

This indicator provides extremely important data at every stage of company development. A better understanding of the return on ad spend can help you to:

• better estimate the budget in the future,