What Is Return on Ad Spend?
Nearly 50% of businesses fail within the first five years in the United States. However, there are measures you can implement to help avoid this.
As you might guess, advertising plays a large role when it comes to ensuring business success. However, not everybody understands the information they need about return on ad spend (ROAS).
We’ve put together a comprehensive guide that will help you get started on the right track.
Let’s dive in.
So, What Is Return on Ad Spend?
Put simply, it’s the profitability or returns you generate from the money you invest in advertising.
To calculate this number, divide the total amount of revenue generated by your ads by the total cost spent on those same campaigns. This will give you an accurate measurement of how profitable each ad was for your business. You can also compare the total revenue with the overall cost of your campaign to get an idea of how much you made or lost on the whole endeavor.
How Do I Calculate Return on Ad Spend?
The formula for calculating ROAS is simple: Revenue generated from your ads/Total amount spent on ads = Return on Ad Spend. To get the most accurate results, you’ll need to factor in any additional costs such as commission fees or production costs.
You should also take into account the time it took to execute each ad and calculate that into your total ROAS.
However, determining the overall cost of ads is a bit more involved. For example, if the ad was spread across multiple platforms, you would need to calculate the cost per platform.
Additionally, if you have paid for ads on other media sites like YouTube or Instagram, you’ll need to factor that in as well.
ROAS Vs ROI
It’s important to note that ROAS and Return on Investment (ROI) measure two very different things. While ROAS is the efficiency of your ad campaign, ROI measures the overall profitability of your business.
Thus, ROAS provides a better view of how well the ad campaigns are working, while ROI measures the overall success of the business.
It’s important to keep this distinction in mind so that you don’t confuse the two metrics. Otherwise, you may have an inaccurate idea of one area’s performance.
ROAS Vs CPA
When it comes to calculating the efficiency of an ad, Return on Ad Spend (ROAS) and Cost Per Acquisition (CPA) are two completely different metrics. While ROAS measures how much money you generate from an ad compared to how much you spent on it, CPA is the total cost of acquiring a customer or sale.
Keeping this information in mind will allow you to make better decisions regarding ROAS and CPA.
What About Mobile Advertising?
Mobile advertising offers a unique opportunity to reach a larger audience and increase ROAS. Mobile users are more likely to access their mobile devices at any time, so ads placed on these platforms can generate higher revenues than those served on desktop or laptop computers.
Additionally, mobile ads often have more engagement due to the immediacy of the medium. It’s worth considering that there are over 5 billion smartphone users. So, this is a substantial market to tap into no matter what product or service your company sells.
How Can I Maximize My Return?
To ensure that your return on ad spend is as high as possible, it’s important to optimize your campaigns.
This is the only way to ensure that you reach (or exceed) your target metrics. Let’s take a closer look at how you can do so.
Keyword Targeting
This is integral to a successful ad campaign — you want to ensure that your ads are reaching the right audience.
If you don’t, your cost per click will skyrocket and you won’t see any return on your investment. In contrast, if your ads are targeted correctly, you should see a solid return.
Finding the right keywords involves having a comprehensive understanding of your audience. This means that you should consider the following information:
- Geographic location
- Level of education
- Annual income
- Age
- Gender
- Hobbies/interests
From here, you can begin to envision the best way to communicate with the average member of your audience. This will directly translate to better campaign performance.
Budgeting
Your budget will have a large impact on the success of your ad campaigns.
You need to make sure you’re setting realistic goals and allocating enough money for them. Of course, you should never budget too low. This will cause you to fall short of your goals.
It may take a bit of time for you to determine the ideal budget for your campaign. For example, you might end up overspending for a few months before fine-tuning your budget to a sweet spot.
Once you make it there, though, all of the hardest work is behind you. You will simply need to make small adjustments in the future so that you can continue to get the best results.
Create a Stellar Landing Page
Once you’ve attracted your audience with well-targeted ads, you need to make sure they have an easy way to convert.
Create a sleek landing page that is both attractive and informative. If it’s not up to par, then potential customers will be less likely to interact with your business in the future.
You will also miss out on a large number of sales. For small businesses, this can be something that can be highly difficult to recover from. To clarify, let’s assume that your campaign falls far short of your intended goals.
Not only will you have wasted money on ads, but you won’t have notable results to show for the time that has passed. The good news is that, with enough research, you can avoid this issue entirely.
Implement A/B Testing
Make sure you’re taking advantage of A/B testing. This technique allows you to compare two versions of your ad and see which performs better.
This is the only way to ensure that your ads are reaching their full potential.
In context, the process is fairly simple. For example, you might run two different ads with the same ad copy but different visuals. You can then check your analytics to determine if there was a large discrepancy in performance.
As you begin to run more A/B tests, you will slowly refine your advertising strategy until you get the best results. It’s important to run A/B tests from time to time as you come up with new ideas.
You never know when something new could work better than another strategy.
Work With a Professional
If you still feel overwhelmed by the process, it might be worth your while to hire a professional.
They can provide invaluable insight and help you maximize your return on ad spend. They will also have access to the necessary tools to help ensure that you overcome obstacles you encounter.
Working with a professional is one of the most powerful opportunities that you can take advantage of. So, be sure that you keep this information in mind.
What Should I Look For in a Professional?
Not all professionals are created equal. That’s why it’s so important to research your potential options. Looking into their past reputation can go a long way.
See what past customers have had to say and consider their experiences. Consider how enjoyable it was to work with them and what their results were. Always consider the amount of experience that they have.
Working with inexperienced firms is essentially rolling the dice. Hiring a qualified professional is the only way to avoid pitfalls you would have encountered. Be wary of businesses that have not worked with people like you before.
You may find yourself dealing with complications if you work with the wrong firm. Don’t be afraid to ask about the way they bill their clients. You will be able to fine-tune your budget from here.
Do you feel as though they are communicative? One of the most important attributes to look for is being able to get support when you need it.
Return on Ad Spend Explained
Initially, handling return on ad spend may seem daunting. The good news is that the guide above has everything you need to know to make the process simple. From there, you will be well on your way toward getting the highest return possible on your ads.
Looking for more information on what we can do? Reach out to us today to see how we can help.
