If you’re a marketer, you probably know what ROAS stands for: Return on Ad Spend. It’s a simple formula that tells you how much revenue you generate for every dollar you spend on advertising. Sounds easy, right?
Wrong.
ROAS is one of the most difficult metrics to measure, compare, and optimize, especially across different industries and platforms. Why? Because there are so many factors that affect it, such as:
- Your business model and profit margins
- Your target audience and customer lifetime value
- Your campaign goals and strategies
- Your ad creative and copy
- Your landing page and conversion funnel
- Your competitors and market conditions
- Your attribution model and tracking tools
And that’s not even the full list.
So, how do you know if your ROAS is good or bad? How do you benchmark it against your peers and competitors? How do you improve it and maximize your ROI?
That’s what this article will try to answer, with a dash of humor, a pinch of data, and a spoonful of tips. Let’s dive in.
What is a good ROAS?
The short answer is: it depends.
The long answer is: it depends on your industry, platform, and goals.
There is no universal ROAS standard that applies to every business and every campaign. What works for one industry may not work for another. What works for one platform may not work for another. What works for one goal may not work for another.
For example, according to a report by WebFX, the average ROAS for Google Ads across all industries is 200%, meaning you earn $2 for every $1 you spend. But this number varies widely by industry, from 100% for travel and hospitality, to 400% for home and garden.
Similarly, according to a report by First Page Sage, the average ROAS for organic search across all industries is 1,000%, meaning you earn $10 for every $1 you spend. But this number also varies by industry, from 500% for IT and managed services, to 1,500% for PCB design and manufacturing.
And these are just averages. They don’t account for the outliers, the variations, and the fluctuations that occur within each industry and each platform.
So, how do you find out what is a good ROAS for your specific business and campaign?
You need to do some research, some analysis, and some testing.
How to research your ROAS benchmarks
One way to get an idea of what is a good ROAS for your industry and platform is to look at some industry reports and benchmarks. These can give you a general sense of what other businesses are achieving and what you can aim for.
For example, you can check out these reports for some ROAS benchmarks by industry and platform:
- Facebook Ads ROAS by Industry Benchmarks (July 2023)
- What’s the Average ROAS for E-Commerce? By Platform and Industry
- Top Social Media Statistics And Trends Of 2023
Of course, these reports are not definitive or comprehensive. They may not reflect your specific niche, market, or audience. They may not account for the latest changes and trends in the industry and platform. They may not use the same methods and metrics as you do.
So, take them with a grain of salt, and use them as a starting point, not an end goal.
How to analyze your ROAS performance
Another way to get an idea of what is a good ROAS for your business and campaign is to look at your own data and performance. This can give you a more accurate and relevant picture of what you are achieving and what you can improve.
To do this, you need to have a clear and consistent way of measuring and tracking your ROAS. You need to use the right tools, the right attribution model, and the right KPIs. You also need to segment your data by different dimensions, such as:
- Campaign type and objective
- Ad platform and network
- Ad format and placement
- Ad creative and copy
- Landing page and offer
- Audience and location
- Time and season
By doing this, you can identify which factors are driving your ROAS up or down, and which ones are more or less profitable. You can also compare your ROAS across different segments, and see how they align with your goals and expectations.
For example, you may find that your ROAS for Facebook Ads is higher than your ROAS for Google Ads, but your ROAS for Google Search is higher than your ROAS for Google Display. You may also find that your ROAS for video ads is higher than your ROAS for image ads, but your ROAS for remarketing ads is higher than your ROAS for prospecting ads.
These insights can help you optimize your budget allocation, your campaign strategy, and your ad performance.
“There is no universal ROAS standard that applies to every business and every campaign. What works for one industry may not work for another. What works for one platform may not work for another. What works for one goal may not work for another.”
How to test your ROAS optimization
The final way to get an idea of what is a good ROAS for your business and campaign is to test different variables and see how they affect your ROAS. This can give you a more experimental and actionable way of finding and implementing the best practices and tactics for your ROAS.
To do this, you need to have a clear and consistent way of testing and optimizing your ROAS. You need to use the right tools, the right methods, and the right metrics. You also need to test one variable at a time, and measure the results and impact.
For example, you can test different variations of your:
- Ad creative and copy
- Landing page and offer
- Audience and location
- Bid and budget
- Keywords and targeting
By doing this, you can find out which variations are more or less effective, and which ones have a higher or lower ROAS. You can also implement the winning variations, and scale up your campaign performance and ROI.
ROAS is one of the most difficult metrics to measure, compare, and optimize, especially across different industries and platforms. But it’s also one of the most important metrics to understand, monitor, and improve, as it directly reflects your advertising efficiency and profitability.
To find out what is a good ROAS for your business and campaign, you need to do some research, some analysis, and some testing. You need to look at some industry reports and benchmarks, your own data and performance, and different variables and variations. You also need to use the right tools, methods, and metrics, and align your ROAS with your goals and expectations.
By doing this, you can not only get an idea of what is a good ROAS, but also how to achieve it and maximize it.
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