What is ROAS and how to improve it?

ROAS, or Return on Advertising Spend, is an indicator that measures the return on advertising investment, which shows how much you earn for every penny spent on promotion. In other words, it determines the ratio between revenue and campaign costs. This allows you to quickly assess whether your marketing efforts are producing the expected results. This is one of the main performance parameters for those involved in online advertising and entrepreneurs selling their products on the Internet.

In this article we will explain how to correctly calculate ROAS and interpret its results. We will also present practical methods to optimize it. You will learn what data to collect and what analytical tools to use to accurately track the return on your advertising campaigns.

Why it’s worth measuring ROAS?

ROAS allows you to immediately verify which campaigns are generating the highest returns and where it’s worth increasing your investment. Regular analysis of this indicator also helps you control spending and align your strategy with your business goals, which is especially important in e-commerce. To fully appreciate its importance, let’s take a look at the most important reasons to monitor ROAS:

• campaign performance evaluation – quick comparison of results from different channels, such as Google Ads and Facebook Ads,
• budget optimization – identifying the most profitable activities, which allows you to better allocate funds,
• spending control – ongoing monitoring prevents budget burn through on ineffective ads,
• strategy alignment – ability to align activities with business priorities,
• decision support – ROAS data facilitates informed investment choices.

Remember, however, that ROAS by itself does not provide a complete picture of success. It’s worth combining it with other metrics, such as ROI or conversion cost, for a more comprehensive analysis. Start monitoring your results today and see which activities benefit you the most and are most effective.

How to calculate ROAS? Formula, examples and interpretation

Calculating ROAS (Return on Advertising Spend) is a simple way to evaluate the effectiveness of advertising campaigns. Just divide the revenue generated by advertising by its cost. With this indicator, you can quickly see if your marketing efforts are profitable, and compare the effectiveness of different advertising channels.

Requation – ROAS = Advertising Campaign Revenue ÷ Advertising Campaign Costs

If you want to express the result as a percentage, the formula is as follows – ROAS (%) = (Advertising Campaign Revenue ÷ Advertising Campaign Costs) × 100%

Let’s look at an example that illustrates how to calculate ROAS. Let’s assume that you spent £1,000 on a Google Ads campaign, and the revenue from it was £5,000. In this case, the ROAS is 5, which means that every zloty you invested brought a return of five times. Another example: you invest PLN 875 in Facebook Ads, and your revenue reaches PLN 6000. Dividing these values (6000 by 875), you get a result of about 6.86, or 686% return.

Interpreting ROAS is as important as calculating it. It’s worth remembering the key tips:

• value above 1 – the campaign generates a profit, and the higher the score, the greater the success,
• value equal to 1 – the campaign comes out at zero, which means no profit, but also no loss,
• value below 1 – the campaign makes a loss, which may be a signal to change the strategy or optimize the marketing activities carried out.

With ROAS, you can easily compare the effectiveness of different platforms, such as search engines or social media, and direct resources to where they yield the best results. This indicator allows you to make informed decisions and maximize your return on advertising investment.

Where to get data to calculate ROAS (Google Ads, Facebook Ads)?

You can get data to calculate ROAS (Return on Advertising Spend) for Google Ads and Facebook Ads directly from the advertising dashboards of these platforms. They offer detailed reports that include information on ad spending and revenue generated. Keep in mind, however, that for this to be possible you need to have properly configured e-commerce tracking (for online stores) or „purchase” events with transaction value (for lead services).

What tools will help you monitor and analyze ROAS?

For effective monitoring and analysis of ROAS, it is worth reaching for dedicated tools that will help you accurately assess the effectiveness of your advertising campaigns and better manage your budget.

What tools will help you monitor and analyze ROAS?

• Google Analytics 4 – provides detailed campaign performance tracking, attribution analysis and report generation so you can easily assess how actions translate into revenue,
• Meta Ads Manager – ideal for managing Facebook and Instagram campaigns, provides ROI data on ads in the Meta Ads ecosystem,
• Google Ads: offers rich summaries of campaign performance, including ROAS, cost-per-click (CPC) and profits achieved,
• spreadsheets (e.g. Excel) – a simple solution for manually calculating ROAS using the appropriate formulas and rules,
• free online calculators – a quick and easy option for those looking for basic analysis tools.

Regular use of these platforms allows you to monitor results on an ongoing basis, optimize your budget and increase the effectiveness of your marketing efforts. Whether you run an online store or operate in another industry, the right tools will help you achieve better results.

What ROAS is good for your industry?

A good ROAS (Return on Advertising Spend) depends on your industry, margins and business model. Expectations for this indicator vary depending on the specific sector and stage of business development.

There is no universal ROAS value that can be confidently applied to every industry – what is considered a success in one business model may not be profitable in another. When setting a target ROAS, it is important to analyze product margins, customer acquisition costs, sales cycle and customer lifetime value (LTV), among other factors. Low-margin e-commerce companies may need a higher ROAS to cover warehousing and logistics costs, while SaaS or subscription services can afford a lower initial return by relying on renewal revenue. Seasonality, campaign goals (sales vs. branding) and retention strategy also affect expected ROAS. Rather than blindly looking at benchmarks, it’s a good idea to rely on your own historical data, run A/B tests and regularly optimize campaigns for key ROAS metrics.

It’s also worth considering the phase of business development. Young companies that are just building brand recognition often accept lower results. Experienced online stores, on the other hand, set the bar much higher, aiming for higher ROAS. Expectations for advertising campaigns are also influenced by factors such as seasonality or the level of competition in the market.

Low ROAS – when to react and what to do?

Low ROAS (Return on Advertising Spend) is a signal that an advertising campaign is not yielding the expected returns and requires an immediate response. When ROAS falls below the level of profitability, further procrastination can lead to financial losses. It is important to quickly identify the problem and make changes to improve the effectiveness of marketing efforts.

To effectively respond to low ROAS, it is worth analyzing data from advertising platforms, such as Google Ads or Meta Ads. Often the cause of the problem is a low conversion rate (CR) or too high cost per click (CPC). Also, campaigns with low ROAS often struggle with misguided targeting or poor quality ad materials.

What steps can you take to improve performance? Here are steps to help increase ROAS:

• analyze key metrics – check CTR (click-through rate) and conversion revenue to identify weaknesses in your campaign,
• optimize targeting – narrow your audience to reach people more interested in your offer,
• adjust keywords – make sure, that they are precise and in line with users’ intentions,
• improve ad content – make sure your messages are attractive and compelling to grab attention,
• improve landing page – landing page design and responsiveness are key, a large number of users abandon sites due to poor user experience,
• use remarketing – reach out again to people who have already shown interest in your offer,
• A/B testing – experiment with different campaign elements to find the most effective solutions.

Regular monitoring of ROAS is the basis for success in online marketing, whether you are in e-commerce or any other industry. With systematic analysis and quick responses, you can avoid losses and increase the effectiveness of your PPC campaigns.

ROAS vs ROI – what are the differences and when to use these metrics?

ROAS (Return on Advertising Spend) and ROI (Return on Investment) differ in the scope of analysis. ROAS focuses on the effectiveness of specific advertising campaigns, indicating how much revenue each zloty spent generates (e.g., a score of 5:1 means 5 zloty of revenue for 1 zloty of spend). ROI, on the other hand, evaluates the overall return on the entire investment, taking into account all costs – not only advertising, but also operations or salaries.

The difference lies in the perspective of the analysis. ROAS is crucial in assessing the effectiveness of promotional activities, such as PPC campaigns on Google Ads, while ROI provides a broader picture of the profitability of an entire project or business. In practice, this means that:

• ROAS: ideal for ongoing monitoring and optimization of advertising campaigns in e-commerce and online marketing,
• ROI: indispensable for larger projects, such as new product launches or expansion into new markets.

Both metrics can and should be used simultaneously. ROAS allows you to quickly adjust your advertising strategies, while ROI gives you a more complete picture of profits over the long term. This combination allows you to accurately measure your results and flexibly achieve your business goals.

What are the most common causes of low ROAS?

Low ROAS (Return on Advertising Spend) is a problem that can result from a number of factors. Below are the most common causes that affect the effectiveness of advertising campaigns, and tips on how to improve them.

The most common cause of low ROAS is an improperly selected audience. If ads reach people who are not interested in the offer, the effectiveness of the campaign drops significantly. Precise targeting and demographic data analysis can help solve this problem.

Another important factor is advertising materials. When graphics, advertising creatives do not attract attention and texts seem monotonous, the click-through rate (CTR) decreases. This is compounded by high cost-per-click (CPC), often due to strong competition or errors in bidding strategy.

Not only ads matter – equally important is the target page. If it loads too slowly or is unintuitive to use, users will quickly abandon it. The lack of a mobile version is another mistake that discourages further development.

Another aspect that requires attention is keyword selection. Omitting long-tail (long-tail) phrases or lack of exclusionary words results in attracting inappropriate traffic. Such users rarely make a purchase, generating costs without results.

Other causes of low ROAS:

• inadequate data analysis – lack of A/B testing makes it difficult to find the best solutions for campaigns,
• limited product margin – low profitability can affect overall ROAS,
• poorly planned budget – directing funds to ineffective channels reduces effectiveness,
• poor offerings or customer service – negative user experiences directly translate into lower conversions,
• lack of optimization – regularly monitoring performance and making changes is key to improving ROAS.

In summary, the success of an advertising campaign depends on many elements – from precise targeting, to the quality of the materials and landing page, to continuous analysis and optimization. Focusing on these areas can significantly increase advertising ROI.

How to optimize campaigns to improve ROAS?

In order to increase return on ad spend (ROAS), it is worth focusing on effective optimization of ad campaigns. It’s important to precisely target your audience and tailor your strategy to their needs, as well as to monitor the results on an ongoing basis. Below you’ll find practical tips on how to improve the results of your marketing efforts.

How to optimize campaigns to improve ROAS? The most important step is precise targeting and data analysis, which allows you to target ads to those most interested in your offerings and manage your budget effectively. Here are detailed strategies to help you achieve better results:

• define your target audience accurately – take into account age, gender, location and interests so your ads reach the right people,
• add keywords – choose specific phrases and use exclusions, which will lower cost-per-click (CPC) and increase the effectiveness of PPC campaigns,
• test different variations – conduct A/B tests to find the most effective ad formats and content that generate higher conversions,
• analyze data – use tools such as Google Ads or Meta Ads, to track conversion revenue and adjust budgets to the best channels,
• take advantage of remarketing – target ads to people who have visited your site, increasing the chances of a purchase at a lower cost,
• optimize landing pages – make them intuitive and responsive on mobile devices, which will improve user experience and impact sales,
• use upselling and cross-selling – these strategies increase average order value, which directly translates into better ROAS.

Remember to regularly review your campaign results. Reallocate funds to the most effective channels, such as search engines or social media, to get the most out of your budget. Even small changes can yield significant results, so don’t be afraid to experiment and adjust your strategy on the fly.

Landing Page Optimization and ROAS

Optimizing your landing page has a huge impact on improving your return on advertising investment, or ROAS (Return on Advertising Spend). A well-designed site can significantly increase the number of conversions, which directly translates into higher profits without having to increase the budget for advertising campaigns.

Page loading speed is one of the most important factors. No less important is the responsiveness of the site – more than half of e-commerce users use mobile devices, so the site must be perfectly adapted to their needs.

Transparent navigation and a clear call to action (CTA) help users understand what steps they should take. It is equally important to ensure consistency between the content of the ad and the landing page – this way visitors do not feel lost after clicking on the ad.

There are several important elements to consider to maximize landing page effectiveness and improve ROAS:

• load speed – minimize wait times by optimizing images and code,
• responsiveness – ensure full adaptation to mobile devices,
• clear navigation – make it easy for users to find what they are looking for,
• consistency with advertising – ensure, that the site’s content matches the advertising message,
• A/B testing – experiment with layout, colors or content to find the best solutions,
• user experience (UX) – simplify the shopping process and offer a variety of payment options to reduce the risk of shopping cart abandonment.

Developing these aspects makes the advertising budget used more efficiently and ROAS increases. Investing in landing page optimization is a step that pays tangible dividends in the form of more conversions and better financial results.

Using remarketing to increase ROAS

Remarketing is a powerful strategy that allows you to significantly increase your advertising ROI, or ROAS, by re-targeting people already familiar with your brand. This allows you to effectively remind users who have previously interacted with your business about your offer, which increases the chance of completing a purchase.

Using tools such as Google Ads or Facebook Ads opens up a wide range of possibilities for remarketing campaigns. They enable precise targeting, so you can target your messages to specific groups – for example, people who have abandoned a shopping cart or browsed specific products on your site. Such personalization increases the effectiveness of your ads and improves your conversion rate and overall campaign performance.

Using remarketing to increase ROAS is based on re-engaging users who have already shown interest in your offer, allowing you to achieve better results with lower advertising costs. Additionally, remarketing helps you optimize your advertising budget. By focusing on interested audiences, you lower your cost-per-click (CPC), while increasing revenue per conversion. In the e-commerce industry, a well-planned remarketing strategy can significantly increase ROAS. However, it’s important to tailor your ad content and offer to your audience’s specific needs and expectations, which builds their trust and encourages them to take action.

A/B tests as key to ROAS optimization

A/B tests are an effective method for optimizing ROAS (Return on Advertising Spend), or return on advertising investment. They involve comparing two versions of campaign elements – such as graphics, titles or call-to-action buttons – to select the ones that generate the best results. This allows you to significantly increase your conversion rate, which directly improves your bottom line.

Testing different ad formats on platforms such as Google Ads or Facebook Ads allows you to better match your content to your audience’s preferences, resulting in lower costs and increased profits.

Optimizing elements such as keywords or targeting becomes easier when you base decisions on test data. In this way, you minimize the risk of mistakes and create campaigns that really pay off. See for yourself how A/B testing can change your approach to advertising and improve the effectiveness of your efforts.

Summary

ROAS (Return on Advertising Spend) is a basic indicator of the effectiveness of advertising campaigns, showing how much revenue each dollar spent on promotion generates. It is calculated by dividing a campaign’s revenue by its costs (e.g., PLN 5,000 in revenue ÷ PLN 1,000 in costs = ROAS 5, or 500%), and a result above 1 means profit, equally 1 means „going to zero,” and below 1 means loss. To properly measure and optimize ROAS, it is useful to collect data from Google Ads, Meta Ads and analytical tools (such as Google Analytics 4). Although ROAS by itself does not reflect the full picture of profitability (it is worth combining it with ROI or cost per conversion), it allows you to quickly identify the most profitable activities and better allocate advertising funds.