Chapter 74
Return On Advertising Spend

To measure how much profit is made from advertising.

Return on advertising spend (ROAS) is calculated as follows:

Where

ROAS = return on advertising spend

A = advertising revenue

C = cost of advertising

An ever-growing percentage of global advertising investments are in digital and social media. To attract customers through an online/digital campaign for their food delivery service, a Singapore company spent $12,000 on a Facebook promotional campaign that produced $18,000 in additional revenue, resulting in a $.50 ROAS:

Return on advertising sales helps marketers decide if an advertising campaign is worth the investment. A positive ROAS would indicate success for the campaign. For those who are curious, ROAS differs from ROI. ROAS measures revenue generated over costs for the specific marketing campaign, whereas ROI measures profitability, which is typically the final financial outcome that most businesses care about. Both are useful and complement each other by providing deeper insight into the relative success of individual marketing campaigns and overall marketing investments.

iMatthew Goulart, 5 Critical Marketing Metrics to Follow, Entrepreneur, July 28, 2016. Retrieved May 3, 2017 from https://www.entrepreneur.com/article/278758; BigCommerce, What Is ROAS? Calculating Return on Ad Spend. Retrieved June 18, 2017 from https://www.bigcommerce.com/ecommerce-answers/what-is-roas-calculating-return-on-ad-spend/; Laura Lake, What Is Return on Ad Spend (ROAS) and How Is it Calculated? The Balance, June 21, 2017. Retrieved June 24, 2017 from https://www.thebalance.com/roas-and-how-is-it-calculated-2295469