What is Return on Ad Spend (ROAS) and why is important in programmatic?

As programmatic continues to mature rapidly, becoming one of the most preferred ways of running ad campaigns, it is fundamental to understand the importance of leveraging programmatic tech to improve the ROI and ROAS of their digital ad campaigns.

While calculating ROI is an important factor of marketing campaign development, ROAS (Return on Ad Spend) has quickly become the preferred ad metric for determining the effectiveness and profitability of digital channels.

Calculating ROAS is pretty easy (revenue divided by ad spend – in short, how many times you get your cost back in revenue) as long as you know a few important data points, like the lifetime value of a customer generated from the adv.

Surely, traffic and conversion data can be useful in assessing several key performance trends, but they don’t speak directly to the profitability of your business.

Digital marketers use this metric to evaluate their marketing efforts on digital channels, helping them allocate budget more effectively and maximize their return.

An acceptable ROAS is influenced by profit margins, operating expenses, and the general health of the company but doesn’t calculate overall profitability like ROI does.

Remember: a good ad spend strategy should mirror a good investment strategy.

-LB

Other sources: see in the LinkedIn comments.

Previously posted by Luca Brighenti via LinkedIn.