Return on Ad Spend (ROAS)
What is ROAS?
Return on ad spend (ROAS) is a marketing efficiency metric that measures the revenue generated for every dollar spent on advertising. It is calculated by dividing total revenue attributed to an ad campaign by the total spend on that campaign. ROAS is one of the most widely used metrics for evaluating the performance of paid media investments.
How does ROAS work?
ROAS works by comparing the revenue generated from a specific advertising campaign to the cost of the campaign. This allows marketers to see how much money they are making or losing on their advertising campaigns.
Types of ROAS:
- Campaign ROAS: This type of ROAS measures the overall performance of a specific advertising campaign.
- Channel ROAS: This type of ROAS measures the performance of a specific advertising channel, such as search engine marketing, social media marketing, or display advertising.
How to measure ROAS:
ROAS is measured using the following formula:
ROAS = Total revenue generated / Total cost of advertising
Why is ROAS important to marketers?
ROAS allows marketers to:
- Track the effectiveness of their advertising campaigns and make necessary adjustments to optimize results.
- Compare the performance of different advertising campaigns and channels.
- Set budgets for future advertising campaigns.
- Allocate their marketing resources more effectively.
Who needs to know what ROAS is:
- Performance marketer
- Digital marketer
- Paid search specialist
- Social media marketer
- Display advertising specialist
- Ecommerce manager
- Retail manager
- Marketing manager
- Agency owner
- CMO
ROAS vs. ROMO in commerce media
ROAS measures revenue relative to spend, but it relies on attribution models that may overcount conversions — particularly when ads appear near high-intent consumers who would have converted regardless. ROMO (Return on Measured Outcome) addresses this by verifying incrementality: it measures not just revenue generated, but revenue that would not have existed without the advertising. For commerce media, ROMO is the more rigorous standard.