Return On Advertising Spend (ROAS) is a digital marketing metric that indicates the economic return generated for every euro spent on advertising, measuring total revenue versus advertising costs for a specific campaign.
It is calculated by dividing campaign revenues by advertising costs (ROAS = Revenues/Costs) and a value greater than 1 indicates profit, helping to understand which campaigns are profitable and where to invest.
Meaning and purpose
Specifico per la pubblicità: A differenza del ROI (Return on Investment), il ROAS si concentra solo sulla spesa pubblicitaria, escludendo altri costi generali.
Measures effectiveness: Allows direct assessment of the success and profitability of an individual advertising campaign.
Guides decisions: Helps companies identify the best-performing advertising strategies to optimize future investments.
Definition of ROAS
ROAS, which stands for Return On Advertising Spend, indicates the ratio of revenue attributable to a specific advertising campaign to the costs incurred for that campaign.
In other words, it shows how many euros of revenue are generated for every euro invested in paid ads.
ROAS formula
The standard ROAS formula is:
The result can be expressed as a numerical value (e.g., 5:1) or as a percentage, multiplying the ratio by 100 (e.g., 500%).
Practical example
If a company spends €1,000 on a campaign that generates €4,000 in revenue, the ROAS will be 4, or 4:1. This means that for every €1 invested in advertising, the company generated €4 in revenue attributable to that campaign.
ROAS, ROI and profitability
ROAS and ROI are not synonymous: ROAS focuses only on the ratio of revenue to advertising expenditure, while ROI also considers other costs and overall profit margin.
A campaign can have positive ROAS but negative ROI if, for example, operational and production costs reduce or cancel out the overall gain.
ROAS vs. ROI
- ROAS (Return on Advertising Sp end): More specific, looks only at revenue vs. ad spend (e.g., Google Ads, Facebook Ads).
- ROI (Return on Investment): Broader, considers all costs (advertising, production, shipping, etc.) for a more comprehensive view of business profitability.
ROAS is a key KPI for optimizing budgets and strategies on different ADV platforms (such as search engines, social, and marketplaces).
By analyzing ROAS by channel, campaign, ad group or creative, you can shift investments to the most profitable activities and reduce waste.