ROAS: how to calculate and use it in marketing

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Return on advertising spend (ROAS) measures the amount of profit generated by a particular ad or campaign.

What is ROAS?

ROAS, usually expressed as a percentage, indicates the revenue generated from each dollar invested in advertising.

Mobile app marketers use this metric to measure the effectiveness of their audience engagement strategies. They can analyse ROAS at different stages, such as the 3rd, 7th and 30th day after the app is installed, to determine how much money users spend during these periods. This approach allows you to identify the most effective channels and campaigns to attract high value users.

Why is ROAS important?

ROAS is a key performance indicator for marketers, emphasising that campaign success is not only about attracting revenue-generating users, but also about ensuring that the cost of acquiring them does not exceed the revenue generated.

Partial ROAS, when viewed in the context of predictive analytics, provides marketers with important insights that allow them to predict the potential value of users. This is especially true when data shows that users who recoup 50% or more of their ad spend within the first three days are more likely to be profitable by day 30. Early campaign optimisation based on such metrics can help you achieve long-term positive ROAS by effectively adjusting ad groups and creative.

How to calculate ROAS

The following formula can be used to calculate ROAS:

For example, if you spend $1,000 on an advertising campaign and make a profit of $2,000, the ROAS will be 200%, where 100% is the break-even point.

At the same time, the ROAS can also be negative, for example, if you spent $100 on advertising and only received $50 in profit, the ROAS will be 50%. This is a signal to review and optimise the creative and marketing channels used to identify and eliminate inefficiencies.

What is a good ROAS?

A good ROAS indicates the effectiveness of an advertising investment and emphasises that it can take time to achieve profitability per user or campaign.

However, what is considered a high ROAS for one company may not be what another expects due to differences in profit margins and business models. For example, hyper-casual games tend to have low profit margins because advertising revenues are minimal and payback is achieved through bulk purchases. At the same time, subscription services such as Netflix or Spotify can offer higher margins due to recurring subscription revenue, despite higher subscriber acquisition costs.

What is targeted ROAS?

Target ROAS is a bid management strategy that aims to achieve a user-defined level of return. It involves setting a target amount of profit you want to make from every dollar you spend on advertising.

Unlike other strategies on Google Ads, where bids are automatically adjusted by Google's algorithms, Target ROAS requires you to develop a bespoke bidding strategy due to the lack of uniform standards.

This approach can be particularly effective in sectors such as e-commerce, where the main objective is to drive in-app purchases. However, a sufficient number of conversions is important for the successful use of targeted ROAS - Google recommends a minimum of 15 conversions in the last 30 days for a campaign. Otherwise, it will be difficult for Google's algorithms to achieve the goal.


  1. ROAS is a key metric for marketers because the presence of valuable users becomes irrelevant if the cost of attracting them exceeds the revenue generated by their activity in the app.
  2. The effectiveness of advertising investment varies from company to company, but it is important that it is positive. It is important to understand that achieving a positive ROAS can take time, sometimes even several months.
  3. By analysing early revenue metrics, you can estimate your partial ROAS and understand if you are moving in the right direction in terms of return on your advertising investment.