A Return on Ad Spend (ROAS) Calculator is a tool that digital marketing professionals and businesses use to determine how much value they’re getting out of their marketing and ad campaigns.
With a ROAS calculator, people can quickly compare the true cost of different ad campaigns and find out which campaigns perform the best and which ones are not really worth the cost.
If you offer any kind of digital marketing services, you’ll need a Return on Ad Spend Calculator on your website so your customers can easily visualize how much revenue they can get out of the conversions your campaigns generate.
How to Calculate Return on Ad Spend
The basic formula used to calculate returns on ad spending is not very complicated. You just need to get the total revenue or sales you generated from a campaign and divide that by the cost of the ad campaign. Multiply the resulting number by 100% to make it easier to read and more understandable when you include it in reports.
Return on Ad Spend (ROAS) = (Total Revenue from Campaign ÷ Cost of Ad Campaign) x 100%
You spent $3,000 on PPC ads or sponsored posts for a week wherein you realized $12,000 in total revenue.
($12,000 ÷ $3,000) x 100% = 400%
Your ROAS for the week comes out to 400%.
ROAS values are usually calculated within a specific time period. Some businesses want to see their ROAS performance metrics on a weekly basis while others prefer monthly calculations. A lot of it depends on how long an ad campaign is used. Using a shorter time period also makes it easier to identify which specific campaigns are responsible for the changes in your revenue numbers — especially if you use multiple ad and marketing campaigns at any given time.
Depending on the ad platform you’re using, you can usually track down which ads or campaigns are responsible for individual sales. This allows you to get a more accurate ROAS calculation because you can directly compare the ad cost to the conversions it was able to generate. Otherwise, you can also subtract your average revenue numbers from the revenue you get when running a new campaign to estimate how much sales growth the ads/campaign actually produced.
It is normal to see inconsistency in your ROAS data. You may get 400% ROAS one week, but only see 200% in the following week, so it’s important to run the numbers regularly and consistently to get a true picture of how cost effective your ad spending really is.
Since the ad campaign is at the beginning of the funnel and revenue is usually one of the later funnel-steps, there is a whole journey of funnel steps between the ad and revenue (e.g. click-through-rate on your website, sign-ups, activation rate, and buy decision). Take this into account when evaluating your ROAS.
What is Considered a Good Return on Ad Spend?
The rule of thumb for an acceptable ROAS is $3 to $4 in sales for every $1 in ad spend, which translates to a ROAS of 300% to 400%. Of course, this isn’t a rule that’s set in stone and varies widely from one company to another.
A ROAS of 100% and below is actually a net loss because if you spend $1 in ads to generate $1 in sales, your revenue is only paying for the cost of advertising and you’re not making any money from the actual product or service that you’re offering.
If you have very thin profit margins, you need to target a much higher ROAS in order to improve your bottom line. It’s important to remember that ad spend also eats up some of your profits, so even a 400% ROAS doesn’t guarantee that you’ll see a significant bump in net profits.
ROAS vs. ROI
ROAS is not a good indicator of income because it doesn’t account for your operating expenses or your profit margins. ROAS is completely separate from ROI or Return on Investment because it only measures the relative performance of ad campaigns based on the sales or leads they’ve generated.
Ad campaigns are part of your marketing budget which is part of your operating expenses. If you spend too much on ads, your operating expenses also increase, which negatively affects your profit margins . But if you concentrate on continuously improving and maximizing your ROAS, you can also get much better ROI over the long term.
Different Types of Ad Spend Calculators
Digital marketing is a pretty broad space, so the type of ROAS or ad spend calculator you’ll need depends on your expertise and the type of conversions and results your clients are looking for.
Social Media Ad Campaign Calculators
Most social media platforms have pretty extensive data analytics tools to help people analyze and tweak their campaigns to get the best results. Adding similar Social Media Ad Calculators to your website lets you easily demonstrate to your customers how your product or service works and how much value they can get out of it.
Here are just a couple of the different Social Media Calculators your clients might find useful:
Cost per View (CPV) for Youtube ads
Engagement Rate and Follow Ratio for Facebook, Instagram and Twitter
Influencer Pricing Calculators
Ad Spend and Pricing Calculators
Ad Spend Calculators typically allow you to work out how much it costs to get your target audience to perform a desired action. This can be any number of things such as clicking on an ad, watching a video, installing an app, or simply engaging with sponsored posts. With this data, advertisers and marketing professionals can properly estimate their budgets and project results in advance so they can figure out if a campaign is worth their time, money and effort.
Some of the most common Ad Spend Calculators include:
Ad Performance Calculators show how effective an ad or marketing was at delivering a desired result. Normally, these calculators are used while the campaign is running or after it has ended and not during the planning or development stage.
A common example is the Conversion Rate Calculator which looks at the total number of successful conversions and compares it with the number of visits an ad or a page gets. A campaign is considered successful if the actual conversion rates are in line with or exceeds expectations.
Here are some other examples of Ad Performance Calculators:
Ad Revenue Calculators look at the results of a campaign in terms of the revenue or sales it was able to generate. This gives digital marketers and businesses a better view of a campaign’s true value by looking at how it boosts sales and/or profits.
Some of the most common Ad Revenue Calculators businesses use include:
Revenue per Thousand Impressions (Impression RPM) Calculator
Customer Lifetime Value (LTV) Calculator
Return on Ad Spend Calculator
Return on Investment Calculator
Email Marketing Calculators
Email Marketing is one of the oldest forms of digital marketing yet it’s still one of the most lucrative. Pretty much every email marketing platform has its own analytics tools, which usually include a couple of Email Marketing Calculators, to help businesses with their decision making.
Email Marketing Calculators provide more insight into the effectiveness of an email marketing campaign. It lets you analyze how many people are actually opening your emails and which ones convert into sales.
Here are a few examples of popular Email Marketing Calculators:
If you want to add your own personalized Ad Spend or Return on Ad Spend Calculator, you can use any one of our premade Calculator Form Templates as a starting point or build one from scratch using our easy-to-use Calculator Builder.
You don’t need any advanced coding knowledge or skill to use our Calculator Builder. It also lets you use the same formulas you already use in Excel or Google Sheets. All you really need to do is design the User Interface around it so that your clients and target audience won’t have a difficult time using it.
The best part is that you can add a new custom calculator to your website today completely free of charge. All you need to do is sign up for an account and start building one. We’ll only require you to upgrade to one of our subscriptions when your calculators exceed 100 monthly visits.
You don’t need to worry about being hit with a massive bill because our pricing is very reasonable. Even our most expensive Premium plan, which comes with all the features and integrations you could ever want, as well as the capacity for up to 300,000 monthly visitors, costs less per month than what a competent developer would charge for an hour of their time.
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