What Is ROAS?

“ROAS” stands for “return on ad spend.” In mobile adtech this metric helps user acquisition managers and campaign managers measure exactly how much advertising is contributing to the bottom line. Tracking return on ad spend across campaigns and ad platforms thus allows marketers to measure, evaluate, and compare the effectiveness of their advertising efforts.

Key Takeaways

Establish a target ROAS before launching a campaign
Improve your ROAS by increasing/optimizing costs and CPI per user segments
Use ROAS to support campaign budget changes and invest in the right advertising channel

Why Is Return On Ad Spend Important?

ROAS is the leading KPI that indicates how much money advertising is generating. It also helps UA or campaign managers forecast whether their efforts are on the right track. Return on ad spend should help them

support ad spend increases and campaign budget changes
invest in the right ad channel
determine the best-performing ad campaigns
generate a benchmark average for their ads to use for future calculations

If you don’t monitor your return on ad spend, you won’t know whether an advertising investment is paying off or if changes need to be made to sustain growth.

How Is ROAS Calculated?

It’s critical that you know how to calculate ROAS. Luckily, this is a simple formula.

Take the revenue generated by your advertising activity and divide it by the cost of that activity.

How Should You Track Your Return on Ad Spend?

Once they know how to calculate this metric, a UA manager can use the ROAS formula to ensure that they’re on track after Day 3, 7, 14, and 30 – for example.

By evaluating how the performance appears on each cohorted day, UA managers can then make calculated decisions into which channels to optimize. For example, if, after X days, app advertisers realize that their ROAS is not improving, they might optimize their CPI. If they are getting good results from a certain campaign, they may increase the bids for the campaign to acquire more users.

How Can I Improve My ROAS?

Here are three ways to improve your return on ad spend.

1. Increase the CPI

To maximize your revenue, advertisers may consider increasing their CPI to reach more engaged users.

One way to quickly increase the visibility of a campaign is to increase the CPI to help improve its campaign ranking. This often results in advertisers engaging with higher-quality users, as they are connecting with users first – before their competitors.

2. Optimize Your Advertising Costs

You can do this by segmenting campaigns by user demographics and thereby optimizing your spend. By observing which users perform better than others, you can create more targeted campaigns, increasing the bids for quality users and decreasing the bids for lower-quality users or excluding them from the campaign.

three people – one woman and two men – smiling at a phone in the center

3. Use Post-Install Events

Monitoring postinstall events, such as revenue, help account managers directly optimize toward ROAS goals. Additionally, retention and any in-game progression events help to identify users that may perform better in the long term.

Conclusion

Calculating your ROAS provides you with valuable insights into the performance and quality of your ad campaign across various channels.

With this valuable and relevant data that you can use to optimize your ad spend – this might mean segmenting users and paying more to serve ads to higher-quality users and adjusting your spend on lower-quality users.