ROAS Calculator

ROAS calculator helps you evaluate return on ad spend, a key metric that indicates the effectiveness of paid ads. Do you ever wonder why some companies ask you where you learned about them, particularly when you’re filling in a form? Well, maybe you already know this, but they’re trying to gather information to know whether their advertising is yielding profit.

So, how did you hear about Omni’s ROAS Calculator? Don’t tell 😜. Keep reading to learn what does ROAS means, the ROAS formula, and the factors influencing your ROAS metric. And make sure also to check out the online marketing conversion calculator.

Return on ad spend or ROAS is the amount of revenue a company generates for every dollar spent on an advertising source.

When a business tests a new advertising source for a campaign, it may compare the ROAS at different stages of the campaign with other advertising sources to gauge their performance and determine which should get renewed.

The ROAS formula is:

ROAS = (Revenue from advertising / Cost of advertising) × 100

That means that if you spent $1,000 on Facebook ads in one month and your revenue for that month is $3,000, your ROAS is ($3,000/$1,000) × 100 = $3 × 100 = 300% per dollar spent on advertising.

But if you made $900 in revenue in the same month, your ROAS is ($900/$1000) × 100 = $0.9 × 100 = 90%.

90% may look acceptable at face value, but don’t be fooled by anyone throwing such ROAS numbers. Anything less than 100% is a loss when evaluating ROAS. The ROAS calculator will help you make sure you don’t interpret your ROAS results wrongly or confusing them with your ROI — check our ROI calculator to learn more about this indicator.

ROAS is NOT ROI!

While ROI gives a more accurate evaluation of your entire business performance, ROAS is restricted to the performance of your ad spend.

Using our example above, is the ROAS of 300% a good return? It depends.

A 300% ROAS means that you gained 200% or $2 from the ad campaign.

But if you have to pay for other expenses such as employee costs and delivery fees or PayPal fees (if you’re receiving money via PayPal) from the $2, your margin reduces further.

Although different businesses have different objectives for their advertising and marketing campaigns, most focus on improving revenue and, ultimately, profit. That means you need to establish some margin of safety if you want to protect your net profit margin. Therefore, a good ROAS is accompanied by profitability after you have accounted for less obvious advertising costs, e.g., vendor fees, commissions, transaction fees, and other business overhead costs.

According to Classy Llama, most businesses, particularly e-commerce businesses, are within profit territory when ROAS is 800% and above.

A ROAS less than 400% means you need to reevaluate your advertising strategy. If it’s within the 400–799% range, you can still be profitable after removing your business operational cost. Just make sure to keep tracking the metric with the ROAS calculator and optimize for opportunities.

1. Input the Ad spend or the cost of an ad source.
2. If you’ve not determined the revenue from your advertising, or you want a ROAS target, select “I don’t know my revenue”. Otherwise, fill the following fields.
3. Provide the ad revenue derived from the ad source to get your ROAS. If you're wondering how to calculate break even ROAS, simply input 100% in the ROAS field to get the breakeven ad revenue.
4. To compare your ROI with ROAS, input your profit margin in the ROI section.

Some factors that can influence your ROAS metric are:

• Your brand popularity. If you are new in a market, you’re likely to have a low ROAS compared to when you’ve established your brand.
• The type of advertising or ad source. If you’re using banner ads, you may have a low ROAS since banners are less likely to be clicked, but they effectively improve your brand awareness.
• Failing campaign. In general, if you’ve got a foothold in a new market and your ROAS is below 300%, review your audience targeting and optimize your campaign to get the best result from your marketing budget.
• Customer reviews.
• Product/service description and images.
• Product price.