ROAS determines if an advertising campaign delivers its money's worth compared to the associated investment. It is a time-specific metric that measures the money spent on marketing versus the revenue generated over a determined period.
This is a profitability metric and one of the most important to user acquisition managers. It provides valuable information by comparing the marketing budget going out and revenue coming in for a campaign.
These constant comparisons enable user acquisition managers to critically and quantitatively evaluate the performance of campaigns and the type of users reached and acquired. It also delivers valuable information on how a specific marketing initiative contributes to the financial bottom line.
Significance to Strategy Development
By combining ROAS with other measurement metrics, such as lifetime value (LTV), you can gain insights to inform future budgets, marketing plans and overall business approaches.
The formula for return on ad spend (ROAS) is:
ROAS = Revenue from campaign ÷ Cost of campaign
A puzzle app runs two campaigns at different times for seven days. Campaign A, with a marketing spend of $100, delivers a ROAS of 20%. Campaign B, with a marketing spend of $1,000, delivers a ROAS of 23%.
Campaign B is more successful than Campaign A indicating that budget should be moved to B.
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Learn about the essential Key Performance Indicators to measure and improve your mobile app marketing acquisition, engagement, retention, conversion and campaign performance. Check out more KPI metrics to measure your app marketing success: