What is ROAS?
As written above, ROAS is an acronym 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 on your Google Ads account, ad groups on your Google Ads account, or down to the keyword level, where you simply calculate ROAS based on individual keywords.
Now you may be thinking of the concept of ROI, but it must be said that there is a difference! ROI is an abbreviation for Return on Investment, which is calculated to get info about the percentage profit a campaign gives.
Many marketers may be unsure which of the methods 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 to 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 if a campaign is worth the investment.
How is ROAS calculated?
We find that there is some 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, you must of course be introduced to the formula, it is quite simple. Simply divide your turnover by your advertising costs:
Revenue / Advertising costs = ROAS
ROAS calculation example
For example, if you spend DKK 1,000 on a Google ad where you spent DKK 100, this will give you a ROAS of 1000%.
The reason ROAS is 1000% is because you have received a return equal to 10 times your investment.
