The gross revenue generated for every dollar spent on advertising is called Return on Ad Spend. (revenue from ad campaign / cost of ad campaign = ROAS)
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Return on advertising spending (ROAS) is a marketing formula that measures the effectiveness of an advertising campaign. ROAS helps online businesses evaluate which methods work and how they can improve future advertising. ROAS is therefore about the costs of advertising.
Total conversion value - total costs / total costs
10 conversions have been acquired with a value of € 50 each. The total conversion value then amounts to € 500. 100 clicks have been registered for which each click has been paid € 1.
The costs of the Ad campaign are then:
(500 - 100)/100 = € 4
It is therefore true that € 1 in costs provides € 4 of profit.
By calculating the ROAS you xan get immediate insights into what each euro yields, but a disadvantage of the ROAS is that it does not measure the exact costs of the advertising investment.