Calculating return on ad spend (ROAS) metrics

When it comes to acquiring new users for mobile apps, few channels perform better than advertising. Ads are one of the most popular ways to discover apps. Because advertising is so effective at increasing an app's user base, it accounts for a sizable portion of the marketing budget. So knowing what you're getting in return for your ad spend is critical.

Enter ROAS. ROAS, or return on ad spend, calculates how much money you make for every dollar you spend on advertising. ROAS analysis demonstrates how to optimize your ad spend for maximum returns. For example, if your Google Ads channel has a higher ROAS than Facebook Ads, you may want to increase your budget for Google Ads campaigns. Similarly, by comparing your ROAS metric for each advertising campaign, you can identify the most profitable ones. It is also possible to calculate ROAS for specific marketing advertising campaigns, such as those used during seasonal marketing. When used properly, ROAS is a clear KPI for your advertising channel.

So, let's take a look at how to calculate your app's ROAS, what a good ROAS for a mobile app is, and how to optimize ROAS to get more out of your ad spend. Here goes.

What is ROAS?

Return on Ad Spend, or ROAS, is a marketing metric that indicates how much money you make from your advertising channel. In short, return on advertising spend (ROAS) is the amount of money you make for each dollar you spend on advertising.

How to calculate return on ad spend (ROAS)

An advertising campaign's ROAS must be calculated using two different data sets.

Your conversion value is the total amount of money you make from an advertisement campaign. Your revenue would be $5,000 if you had 500 sales from your paid app during an ad campaign, and your app cost $10.

Your advertising spend is the sum of money you use to run your campaign. You have two options now for calculating your ad spend. You have two options: you can factor in all of the costs you incurred for running your campaign, or you can just take into account the money you spent on ads (your ads budget). These costs cover everything, including the salaries of your staff and any additional costs like consulting fees or overhead from tool subscriptions. They also include the payments you made to contractors (for copywriting or designing the ad creatives, for example). Assume for the purposes of this computation that you invested $1000 in your campaign.

The ROAS for this campaign is now determined by applying this data to the formula below:

ROAS = Revenue from ads/Cost of implementing those ads

Your ROAS is now $5000/$1000, or 5:1, in this example. Typically, you would use an express ROAS ratio. However, you can also express it using a percentage or multiplier. In this instance, your ROAS may also be stated as 500% or 5 times. Or, to put it plainly, your ROAS is 5.