“What Is ROAS?” How To Calculate Return On Ad Spend For PPC Campaigns

All marketers know that the success of your digital marketing campaigns rests on several key factors. These factors include thoughtfully assessing the needs and concerns of your target audience, creating compelling content that answers consumers’ top questions and helps them solve their problems, and of course, setting realistic, measurable goals.

To succeed, you need to measure the effectiveness of every aspect of your marketing campaigns, from lead generation and conversions to cost per lead (CPL) and cost per acquisition (CPA). But because your business should never have to overspend on ad campaigns, one of the most important metrics you should be measuring is your return on ad spend (ROAS).

What Is Your Return On Ad Spend?

ROAS (return on ad spend) is a marketing metric that measures how much your business earns in revenue for every dollar spent on marketing or advertising. ROAS is a relatively simple calculation. It’s the total profit you make from PPC ads divided by the total you spend. 

For example, if your Google Ads for a given month cost your business $2,000, and you make $4,000 from those ads, your ROAS would be 2X (or 200%).

While the formula for calculating the ROAS of your Google and Facebook ads is straightforward, leveraging that formula can be a bit more complicated. Calculating the return on ad spend for your Facebook and Google ads will help you get a read on what’s working with those ads—and what isn’t. That means continual improvement in your ad performance and more money for your business.

Calculating ROAS For Facebook Ads

The first step to measure the ROAS for your Facebook ads is to install the Facebook pixel on your website. This code tracks website visitor conversions from your Facebook ads. Once you’ve correctly installed the pixel, you’ll be able to access a user-friendly dashboard that will display key metrics such as the number of page views, leads and purchases. 

The second step is to set up a “custom reporting column” in your Facebook Ads Manager. This will show you how many products were purchased—and your return on ad spend.

Calculating ROAS For Google Ads    

Not surprisingly, calculating your ROAS for Google Ads involves a different process. The first step is setting up conversion tracking on your website. With conversion tracking, you’ll be able to see several customer actions, including sign ups, form submissions and purchases. This will enable you to calculate your ROAS.

The Power Of Pay-Per-Click (PPC)

Marketers who advertise through Google Ads make (on average) $2 for every $1 they spend on the platform—that’s a 200% return on ad spend. And more than 25% of users who click on a Facebook ad purchase products from the sponsoring business.

Of course, those metrics reflect average marketing performance. To know how well your own business fares, you need to understand how to measure the ROAS of your Facebook and Google Ads. Once you accurately capture this metric, you can adjust your strategy to improve ad performance.

The value of accurate measurement in digital marketing isn’t simply about knowing something you didn’t know before. It’s in using the insights those measurements generate to improve the performance of your marketing campaigns and increase your profits.

To learn more about the ways our digital marketing expertise can help you achieve your goals—and take your business to the next level—check out our blog! Listen to our 10 Minute Marketing podcast on why Facebook Ads is a good investment, and stay tuned for a sequel episode on Google Ads. For a free digital marketing assessment or to discuss how we can empower your social media strategies, please contact us.