ROAS stands for “Return on Ad Spend” is a term for one of the most popular financial metrics in the digital marketing world. In general, this indicator is an alternative to ROI, or “Return on Investment”. ROAS is commonly used by eCommerce businesses to measure the effectiveness of a marketing campaign.
It is worth noting that just because a company has a high ROI on advertising costs does not mean that the company is profitable. This is because there are still many other costs that need to be calculated before determining the company’s net profit. This metric shows the existing correlation between the effort spent on advertising and the company’s revenue.
In addition to gauging how generally effective a company’s advertising is in terms of generating sales, ROAS can be used to compare the performance of one ad campaign against another. For example, imagine the situation that campaign “A” can generate twice the increase in sales than campaign “B”. But keep in mind that if Campaign B is only worth one-fifth the price of Campaign A, then Marketing Campaign B will have more ROI.
Some advertising efforts can increase total sales without noticeably improving profitability, while other efforts can show significant gains in the bottom line, even if sales do not grow much.
