Google Ads is the most prominent advertising platform in the world, by a large margin. In 2023, Google Ads generated 39% of worldwide digital advertising revenue, more than Facebook, Amazon Ads, and TikTok combined. And it’s no surprise – Google Ads enables digital marketers to run highly-targeted ad campaigns across a variety of channels including search, display, and video.
With so much advertising budget being invested in Google Ads, it’s important for paid media marketers to manage their spend in the channel strategically. By tracking and optimizing Google Ads ROAS, marketers can ensure they’re making the most of Google’s powerful advertising platform without blowing their budget.
What is Return on Ad Spend (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.
How to calculate ROAS Google Ads
ROAS is calculated by dividing the amount of revenue attributed to a specific advertising campaign by the total cost of the campaign.
Campaign revenue
________________ = ROAS
Campaign costs
To calculate ROAS for Google Ads, divide the revenue attributed to a specific Google Ads campaign, or group of campaigns, by campaign costs. For example, if you have $2000 revenue attributed to Google Ads in Q1 across all campaigns, and your total Google Ads costs for Q1 are $1000, you will have a Google Ads ROAS of 2.
Total revenue attributed to Google Ads campaigns in Q1
_____________________________________________________________ = Google ROAS
Total Google Ads campaign costs in Q1
Increase your Google Ads ROAS
Making optimizations to improve ROAS for Google Ads is critical for scaling your investments in the channel. The good news is that there are numerous steps you can take to increase Google ROAS and get more for every dollar invested.
- Set Target ROAS Recommendations in Google Ads
One of the first steps you can take is to define Target ROAS recommendations in Google Ads. Google’s Target ROAS functionality uses Google Ads Smart Bidding to analyze and intelligently predict the value of a potential conversion every time a user searches for products or services that you’re advertising, and then sets your bid to maximize your return.
By defining a Target ROAS, either at the campaign or the program level, you can ensure that your budget is being allocated towards engaging high-intent users, increasing revenue per dollar invested.
Once Target ROAS is set, Google may bid aggressively when it recognizes the opportunity for return, and reduce your bid otherwise. For that reason, Google recommends you remove daily budget limits when using target ROAS, although states that “over a month-long billing cycle, you won't be charged more than your average daily budget would've allowed for over 30.4 days.”
To learn more about Target ROAS and how to set it up, you can follow Google’s instructions here.
- Run split tests with Google custom experiments
As discussed in our article on increasing ROAS, testing and optimizing your ads is critical for increasing the number of target users that engage with your campaign.
With the average consumer being exposed to hundreds if not thousands of ads per day across search, video, and display, it’s important to identify the ad variants that capture your target audience’s attention, and reallocate your budget accordingly.
A great way to do this in Google Ads is to run split tests using Google custom experiments. Custom experiments enable you to create campaign variants and compare how variants perform against your original campaign over time. The campaign variant will share the original campaign’s traffic and a specified portion of its budget.
Once you’ve drawn a conclusion from your experiment, you can easily apply your campaign variant to the original campaign or convert the variant into a new campaign. By continually testing and optimizing your campaigns, you can ensure that you’re delivering experiences that captivate your target audience and increase ROAS for Google Ads.
Learn more about how to set up a custom experiment in Google Ads here.
- Use negative keywords
When focusing on increasing Google Ads ROAS, specifying who not to target is just as important as choosing who to target. No matter how compelling your offer, advertisements served to the wrong audience will result in wasted budget and low ROAS.
One way to exclude irrelevant audiences from your campaign targeting is to use Google negative keywords. Negative keywords enable you to prevent your campaigns from being served on certain specified search terms. For example, a campaign promoting reading glasses may want to define negative keywords such as “wine glasses” and “drinking glasses” to prevent their ads being served to users on the hunt for drinkware.
Negative keywords are available across Search, Display, and Video campaigns. By preventing your budget from being invested in the wrong users, you can ensure more budget is allocated to your target audience, driving conversions and increasing ROAS.
You can learn more about Google negative keywords here.
- Fine-tune targeting with Audience suppression
In addition to leveraging Google audience exclusion capabilities, you can also leverage external solutions alongside Google to sharpen the targeting of your Google Ads campaigns.
As noted above, one of the biggest drivers of low ROAS is not poor revenue generation, but rather inefficient campaign spend. When a campaign audience is defined using search query and demographic data, it may end up including active or recent customers that are not interested in your campaign offer. Serving advertisements to active customers can result in not only wasted ad spend, but also a poor customer experience.
Fine-tune your Google Ad campaign targeting by creating customer segments in a first-party data platform, such as a data warehouse, and syncing them to Google Marketing Platform, where they can be leveraged as suppression lists on your campaigns. By importing suppression lists to Google Marketing Platform, preventing your budget from being invested in the active customers with no interest in buying and ensuring more budget is allocated to target future customers.
When syncing audiences to Google from any external or internal system, it’s important to ensure that you have the necessary privacy controls in place to support user consent management and data privacy. For more information on how Google Marketing Platform processes and handles first-party data uploaded to their platform, you can learn more about Customer Match here.
Bonus: Wherever possible, sync suppression audiences to Google Marketing Platform in real time. This will ensure that customers are removed from your advertising campaigns as soon as they have converted, optimizing campaign costs and improving the customer experience.
If you’re interested in increasing ROAS for Google Ads with real-time audience suppression, see how you can get started with WasteNot in just a few minutes here.
- Improve the post-click experience
Capturing your target customers’ attention with effective creative is a great start, but for most businesses, clicks do not equal revenue. Investing in improving the post-click experience is a great way to translate ad traffic into revenue and increase Google Ads ROAS. Two key things that you can do to improve the post-click experience are:
- Increase load speed - Recent Google research found that the chance of a user bouncing increases by 32% when page load time increases from 1 to 3 seconds; and by 90% when page load time increases from 1 to 5 seconds. Investing in shaving seconds, or even milliseconds, off of your page load speed can reduce bounce rate and increase the likelihood that your target customers will make a purchase.
- Personalize the landing page experience - McKinsey & Co. reported that 71% of customers expect personalization, and 76% of customers actually get frustrated when their experiences with brands aren’t personalized. Align your landing pages to the copy and creative in your advertising campaign to create a consistent customer experience, and leverage customer data to tailor the landing page experience to the user where possible.
What is a good Google Ads ROAS?
While many sources will claim that teams should aim for a ROAS of 2.0 for Google Ads, a 2023 study has found that the average ROAS for PPC/SEM campaigns is 1.55. Achieving a return of 1.55 or higher can be considered a good ROAS for Google Ads.
That said, you should always evaluate ROAS in context, as certain campaign types can be expected to have better revenue returns than others. For example, top-of-funnel, brand awareness campaigns may have lower ROAS than bottom-of-funnel, direct conversion campaigns. But that does not mean that you should abandon all top-of-funnel campaigns. Rather, it’s helpful to use additional metrics, such as Click Through Rate (CTR), alongside ROAS to further analyze campaign performance.
It’s also important to consider your average Customer Lifetime Value (CLTV) when evaluating ROAS. Businesses with high retention, such as Financial Services, may be willing to accept a lower ROAS score, as they know that once a customer converts they are likely to remain a customer for a long period of time. Businesses with lower retention, such as eCommerce, may expect a higher ROAS, as they have less certainty that customers will make repeat purchases over time. Based on 2024 ROAS industry benchmarks, Financial Services averaged a ROAS of 1.05 for PPC advertising, while eCommerce averaged a ROAS of 2.05 for PPC advertising. To understand healthy ROAS for your industry, you can see FirstPageSage’s 2024 ROAS benchmarks here.
Key takeaways
- Google Ads is the leading advertising platform in the world, generating 39% of worldwide digital advertising revenue in 2023. By tracking ROAS for Google Ads, paid marketing managers can optimize their spend in the channel.
- Establish a Target ROAS when creating a campaign in Google Ads. This will help Google Ads optimize bidding to maximize your return.
- Use Google custom experiments to create campaign variants, identify what captures your target audience’s attention, and reallocate budget accordingly.
- When creating campaigns in Google Ads, define negative keywords to ensure you’re not wasting budget on adjacent search terms.
- Fine-tune your Google Ad campaign targeting by creating customer segments in a first-party data platform and syncing them to Google Marketing Platform, where they can be leveraged for suppression lists.
- Translate ad traffic into revenue by increasing page load speed and personalizing the landing page content
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