A “ good ” ROAS depends on several factors, including your profit margins, industry, and average cost-per-click (CPC). Most companies aim for a 4:1 ratio — $4 in revenue to $1 in ad costs. The average ROAS , however, is 2:1 — $2 in revenue to $1 in ad costs.
What’s a “Good” ROAS ? According to a 2015 study by Nielsen, the average ROAS across most industries hovers around 287% (or $2.87 for every $1 spent). Note, though, that this is the average return on ad spend for the average company across all industries.
ROI measures the profit generated by ads relative to the cost of those ads. In contrast, ROAS measures gross revenue generated for every dollar spent on advertising. It is an advertiser-centric metric that gauges the effectiveness of online advertising campaigns.
Facebook’s Return on Ad Spend ( ROAS ) measures the revenue generated as compared to the money spent on an advertising. It is a business metric, meaning that it measures not only the performance of an ad but the performance of your effort and your team.
Luckily, the opposite is true: The ROAS formula is incredibly simple. ROAS equals your total conversion value divided by your advertising costs. If it costs you $20 in ad spend to sell one unit of a $100 product, your ROAS is 5—for each dollar you spend on advertising, you earn $5 back.
What’s a Good ROAS 4.00 is a commonly accepted benchmark for ROAS . That is $4 in revenue for every $1 in ad spending. But, that number won’t work for everyone. For example, if you run a web store with thin operating margins, 4.00 may be too low.
As a rule of thumb, a RoAS of around 6x is a good starting point — or an ACoS of 16.6%. But this is a very vague benchmark that you need to review within the specific context of your ad campaign.
Here’s how to either increase revenue or lower cost so you can boost the ROAS of your PPC campaigns: Improve Mobile-Friendliness of Your Website. Spy on Your Competitors. Refine Your Keyword Targeting. Use Geo-Targeting. Optimize Your Landing Pages. Use Conversion Rate Optimization—CRO—Strategies. Promote Seasonal Offers.
A good marketing ROI is 5:1. A ratio over 5:1 is considered strong for most businesses, and a 10:1 ratio is exceptional. Achieving a ratio higher than 10:1 ratio is possible, but it shouldn’t be the expectation. Your target ratio is largely dependent on your cost structure and will vary depending on your industry.
ROI is calculated by subtracting the initial value of the investment from the final value of the investment (which equals the net return), then dividing this new number (the net return) by the cost of the investment, and, finally, multiplying it by 100.
ROAS is simply the total revenue generated from your Facebook ads (your return) divided by your total ad spend. For instance, suppose you spend $50,000 dollars in a month on Facebook ads and they generate $150,000 in new sales for your business. That’s a 3X ROAS ($150,000/$50,000).
For businesses using the Purchase event to track sales, measuring ROAS effectively requires you to be tracking the value of the purchases from Facebook not just the volume of purchases. To check that the value of orders is being sent via the Pixel to your ad account, click View Details under the Purchase event action.
Yes, the CPC is lower, but if you set up your campaigns right, your campaigns will drive high-quality clicks that produce value for your business. As a result, Facebook ads are often a much more profitable way to market your business than other advertising channels.