Comments on: Predicting ROAS and Launching Better PPC Campaigns

By: oigel.com

oigel.com — Mon, 01 Aug 2011 20:08:38 +0000

Predicting ROAS and Launching Better PPC Campaigns…

Return on Ad-Spend, or ROAS, is a metric calculated by dividing the revenue generated from an ad campaign, by the cost of that campaign. It can be applied to any sales situation that has an advertising spend, even a bake sale: Lets say your mother gave…

By: Heather Dawson

Heather Dawson — Thu, 21 Jan 2010 04:43:25 +0000

Interesting article. I really like the example data that implies that a typial ROAS is in the 100% to 200% range. I think that if you also looked at including the Conversion Marketing Ad spend (personalized advertising to the shopper while in the website) then the metrics can be alot higher. We have seen consistent ROAS double for a site that combines an advertising focus of across getting traffic and then increasing the conversion rate with dynamic personalized offers. Just something to think about as more and more site also focus on the close after the browse.

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By: Haal meer uit je Web Analytics, deel 1 | Bijgespijkerd

Haal meer uit je Web Analytics, deel 1 | Bijgespijkerd — Tue, 03 Nov 2009 12:22:00 +0000

[...] wordt berekend door de opbrengsten te delen door de mediakosten (er zijn meer mogelijkheden om ROAS te berekenen). Wanneer deze 100% is dan draai je dus break even. Dit percentage geeft aan in welke mate de [...]

By: Gab Goldenberg

Gab Goldenberg — Sun, 08 Feb 2009 05:59:47 +0000

Marc, a simplification occurred to me since I thought you were going there.

In the revenue style metric, you have

revenue / cost

Where revenue = clicks x conversion rate x average order
cost = clicks x cpc

In other words, you have clicks ( (conversions x average order) /cpc )
Or in English, clicks times all of [cpc divided by all of (conversions x average order)]

Meaning that really, it’s just (conversions x average order)/cpc (since clicks/clicks = 1 and therefore doesn’t need to be expressed). Am I missing something?

ROAS = Conversion rate x Average Order / CPC …

ex.: 0.01 (a 1% conversion rate) x avg order $200 / $1 CPC = $2 ROAS – 2 bucks in revenue for each dollar in ads.

Note: George Michie wrote a good post at RKG about how ROAS isn’t constant and that there’s a point where you have decreasing marginal ROAS so you eventually need to track the speed at which roas is changing. E.g. At the start you may get $2 ROAS, but then once you get a core part of the market, it takes more ad spend to gain marginal sales, so you need to figure out much more you can spend and still get a positive ROAS.

By: Marc Poirier

Marc Poirier — Fri, 23 Jan 2009 00:07:53 +0000

David, how does Clix Marketing calculate ROAS? I think our readers would benefit from your input here.

By: David Szetela

David Szetela — Thu, 22 Jan 2009 21:20:59 +0000

Chouette! Comme il est intelligent, ce mec!

By: Naoise Osborne

Naoise Osborne — Thu, 22 Jan 2009 18:15:43 +0000

Ah wait, Luke you used the word ‘return’ without defining it… now I don’t know which formula you’re referring to. Ahh blessed confusion.

By: Naoise Osborne

Naoise Osborne — Thu, 22 Jan 2009 17:46:48 +0000

I would tend to agree with you Luke, and in fact that’s how I set about writing this article. Then I went surfing around the PPC sphere and found that most sites (Bruce Clay for example and many others) seem to be calculating things with the profitability metric, so I thought I better write about both and help clear up the issue.

Maybe I just made it muddier, who knows