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What is ROAS?

Everything You Need to Know About PLAs (Product Listing Ads)

This post is part of the Google Merchant Centre Guide - created by our Google Shopping Team

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Introduction

ROAS stands for Return on Advertising Spend. It is a measure of the effectiveness of an advertising campaign in terms of the revenue generated for every pound spent on advertising.

To calculate ROAS, you divide the total revenue generated from an advertising campaign by the total amount spent on advertising.

For example, if you spend £100 on advertising and it generates £500 in revenue, your ROAS would be 500/100 = 5. This means that for every pound you spent on advertising, you generated £5 in revenue.

ROAS can be a useful metric for evaluating the performance of an advertising campaign and for comparing the effectiveness of different advertising strategies.

In Google Ads, you’ll also see ROAS presented as “Conv. Value / Cost” and presented as both a percentage such as 500% and as 5:1.

What is a Good ROAS?

There is no definitive answer to this question, as a “good” ROAS will depend on a variety of factors, including the type of business, the industry in which the business operates, and the specific goals of the advertising campaign.

In general, however, a higher ROAS is considered better, as it indicates that the advertising campaign is generating a higher return on investment. For example, a ROAS of 5 or higher is generally considered good, while a ROAS of 10 or higher is considered excellent.

It’s important to remember that ROAS is only one metric among many that can be used to evaluate the effectiveness of an advertising campaign, and it should be considered in the context of your overall business goals and marketing strategy.

To achieve a high ROAS, we recommend these eCommerce CRO Tips and hiring an eCommerce CRO Agency

How to Increase ROAS (Return on Ad Spend)

  1. Identify your target audience: The first step in increasing your ROAS is to identify the specific group of people who are most likely to be interested in your products or services. By targeting your advertising efforts at this group, you can increase the chances that your ads will be seen by people who are interested in what you have to offer, which can help increase your ROAS.
  2. Use relevant, high-intent keywords: Choosing the right keywords to target in your advertising efforts can help ensure that your ads are shown to people who are actively searching for products or services like yours. By using keywords that are relevant to your business and your target audience, you can improve the chances that your ads will be seen by people who are interested in what you have to offer.
  3. Test different ad formats and placements: Experimenting with different ad formats and placements can help you find the combinations that work best for your business. For example, you might try using different types of ads (such as Google Display Ads or Google Search ads) or placing your ads in different locations (such as on different websites or in different parts of a website) to see which ones generate the best results.
  4. Track and analyse your results: In order to increase your ROAS, it’s important to track and analyse the performance of your advertising campaigns. By using tools like Google Analytics or other analytics software, you can gain valuable insights into which ads are performing well and which ones are not, and you can use this information to make changes and improve your ROAS over time.
  5. Optimise your website and landing pages using eCommerce conversion rate optimisation techniques. Start with page speed optimisation and test images, text layouts, text content and headlines, calls to action, social proof and other content to establish which converts best and will produce a higher ROAS.

Remember, increasing your ROAS is not a one-time effort, but rather an ongoing process that requires careful planning, testing, and analysis. By following these tips and staying focused on your goals, you can increase your ROAS and improve the effectiveness of your advertising efforts.

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