To calculate your ROAS, you will need to know your total revenue and your total ad spend. Once you have those numbers, you simply divide total revenue by total ad spend. This number will be represented as a percentage and will give you your ROAS.
For example, let’s say that over the course of one month, you generated $5,000 in revenue and spent $1,000 on ads. Your ROAS would be 5 (5000/1000), or 500%. This means that for every dollar you spent on ads, you generated $5 in revenue.
Determine the revenue from your advertising source
When determining how much revenue you are generating from your advertising source, it is important to keep in mind what your goals are for advertising. If you are looking to generate leads, then CPC or CPM may be more important than conversion rate. However, if you are looking to generate sales, then conversion rate will be more important than CPC or CPM.
The formula for calculating ROAS varies depending on which metric you use as well:
If using CPC: Revenue ÷ CPC = ROAS If using CPM: Revenue ÷ (CPM/1000) = ROAS If using Conversion Rate: Revenue ÷ Cost Per Conversion = ROAS.
Divide the revenue by the cost of the advertising
How to Calculate ROAS
ROAS, or return on ad spend, is a key metric for any advertiser. It tells you how much revenue your campaigns are generating for every dollar you spend on advertising. To calculate ROAS, simply divide your total revenue by your total ad spend.
For example, let’s say you spent $100 on ads and generated $500 in sales. Your ROAS would be 5 x (500/100). This means that for every dollar you spend on advertising, you’re generating $5 in sales.
ROAS is a useful metric because it allows you to compare the efficiency of different campaigns or ad strategies. A high ROAS means that your campaign is generate a lot of sales for very little investment. A low ROAS indicates that your campaign isn’t performing as well as it could be and needs some optimization.
If your ROAS is less than 100%, your advertising is at a loss
If you’re not already familiar with return on advertising spend (ROAS), it’s a metric that measures how much revenue your company generates for every dollar spent on advertising. In other words, it tells you how efficient your advertising is at generating sales.
Ideally, you want your ROAS to be 100% or higher. This means that for every dollar you spend on ads, you’re generating at least one dollar in revenue. Anything less than that means your advertising is losing money.
There are a few different ways to calculate your ROAS, but the most basic formula is pretty straightforward:
ROAS = Total Revenue / Total Ad Spend
So if your company generated $10,000 in revenue last month and you spent $5,000 on ads, your ROAS would be 200%. ($10,000 in revenue / $5,000 in ad spend = 200% ROAS)
Of course, calculating your ROAS is only half the battle. Once you know what it is, you need to take action to improve it.