How to calculate ROAS

Return on Ad Spend (ROAS) is an essential marketing metric that is used to measure the amount of revenue generated per dollar invested in an advertising campaign. By analyzing ROAS, marketers can understand how well their advertising programs are performing and make better decisions on how to invest their budget. 

Improving advertising efficiency is particularly important today, with 75% of CMOs reporting that they’re facing increased pressure to “do more with less”  budget (Gartner, 2023).

ROAS calculation formula

ROAS is calculated by dividing the amount of revenue attributed to a campaign by the campaign cost. 

‍Campaign revenue

_____________________ = ROAS

Campaign cost

‍

For example, if a Facebook Advertising campaign generated $2,000 in revenue, and it cost $1,000 in total, it will result in a ROAS of 2. 

$2000

________ = 2

$1000

Sounds simple, right? As is often the case in calculating metrics, the devil is in the details. When determining ROAS, it’s important to consider how you are calculating revenue and costs.

Calculating advertising revenue

There are several different methods for calculating the amount of revenue generated by a specific advertising campaign. The customer journey is often composed of multiple customer touchpoints, and different attribution models can be used to attribute revenue generated to different points of the customer journey. 

Single-touch Attribution models attribute revenue to a specific touchpoint in the customer journey, such as the first touch in the journey or the last touch before conversion. Multi-touch Attribution attributes revenue to all touchpoints in customer journey equally. 

For more information on how to choose the right attribution model for your campaigns, we’d recommend reviewing Branch’s information on the topic here. When calculating ROAS, it’s important to be thoughtful about how you’re attributing revenue to your advertising campaigns to ensure that your ROAS accurately reflects the value advertising campaigns are bringing to your business.

Calculating advertising costs

In addition to deciding how to attribute revenue to an advertising campaign, it’s also important to consider how you’re defining costs when calculating ROAS. 

There are multiple cost categories involved in running an advertising campaign. In addition to platform costs, you may also encounter costs such as partner and vendor fees, and/or external agency or contractor costs. It’s important to consider which, if any, of these costs should be included in your advertising costs figure to ensure that your ROAS accurately reflects the amount of marketing budget required to launch an advertising campaign.

Key takeaways

• Return on Ad Spend (ROAS) measures the amount of revenue generated per dollar invested in an advertising campaign
• To calculate ROAS, divide the amount of revenue attributed to a specific advertising campaign by the total cost of the campaign.
• When determining campaign revenue, consider which attribution model makes the most sense for your business
• When calculating campaign costs, consider whether you should include supplemental costs, such as vendor or agency fees, in addition to ad platform costs

Interested in increasing ROAS? See these 4 tips on how to increase ROAS for your campaigns.