Gross revenue generated for every dollar spent on advertising. (revenue from ad campaign / cost of ad campaign = ROAS)
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. The ROAS is therefore about the costs of advertising.
Total conversion value - total costs / total costs
10 conversions have been realized 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 extra.
By calculating the ROAS you get immediate insight into what a euro yields, but a disadvantage of the ROAS is that it does not measure the exact costs of the advertising investment.