What is ROAS?
As written above, ROAS is an abbreviation for Return on Ad Spend, which is about the return you get from using Google Ads. This compares the revenue you get from Google Ads campaigns with your total spend with Google.
ROAS can be calculated at several different levels. For example, you can choose to calculate ROAS for your entire Google Ads account, selected campaigns in your Google Ads account, ad groups in your Google Ads account, or all the way down to the keyword level, where you simply calculate ROAS based on individual keywords.
You might be thinking of the term ROI, but there's a difference! ROI is an abbreviation for Return on Investment, which is calculated to find out the percentage of profit a campaign makes.
Many marketers can be unsure which one to choose. So let's define the difference between them here:
The difference between ROAS and ROI
The purpose of ROAS is to compare how much money you spend versus how much you earn, while the purpose of ROI is to calculate the amount you earn after you have paid all your expenses.
ROI cannot be used to compare, but only as a calculation that can give you information about whether a campaign is worth the investment.
How is ROAS calculated?
We find that there is a lot of confusion about how to calculate and use ROAS as a measurement tool. Therefore, in this section, we will take a closer look at an example of a Return on Ad Spend ROAS calculation.
But first, of course, you need to be presented with the formula, it's quite simple. Simply divide your revenue by your advertising costs:
Revenue / Ad spend = ROAS
ROAS calculation example
For example, if you make a turnover of 1000 DKK on a Google ad where you have spent 100 DKK, this gives you an ROAS of 1000%.
The reason ROAS is 1000% is because you have received a return equivalent to 10 times your investment.
