Return on Ad Spend measures the effectiveness of your advertising spend as a percentage or dollar value. ROAS can be used as an aggregate metric to measure the overall performance of a campaign, or as a measure of performance of individual campaign tactics. Either way, this metric gives you better insight into which campaigns or campaign groups are delivering the greatest return and which require optimization or reallocation.
Often confused with the larger umbrella term ROI, ROAS can be considered an advertising-centric or tactic-specific evaluation metric as part of the wider ROI definition. In other words, while ROAS measures the advertising specific costs to deliver a set campaign, ROI is a more global business metric that takes into account additional costs to derive its quantification and is generally applied to larger strategic initiatives.
Nevertheless, there are a few individuals that also like to include the costs to produce and deploy the ads. In such cases, the formula would be adjusted to be: (Revenue - Costs) / Ad Spend. However, these costs are often more volatile and difficult to capture accurately, which adds further complexity for little incremental benefit.
