As a company, but certainly also as a digital agency, you cannot ignore it. Google & Facebook Ads have become an integral part of online marketing. They are the excellent tools to promote and grow your business online. Ads influence users in their buying behavior and that can lead to a higher conversion rate. The purchasing needs and wishes of consumers are of course very personal and it is therefore important that your campaigns are in line with these factors. Both the Return on investment and the Return on Ads Spend provide insight into how profitable the current campaigns are. In this article we tell you more about ROI, ROAS and POAS.
ROI,ROAS and the difference between these two terms
Return on Investment is an important term to find out whether your activities actually generate money. ROI . is especially important in digital marketing an important term.
What is the ROI of your Google Ads Campaigns? Are the campaigns profitable or is it better to go in a different direction? ROI is based on your marketing goals and provides clear insight into the impact the Google Ads campaigns have had on your business. By calculating the ratio between costs and net profit, you gain insight into the amount you earn or lose with your campaigns. To calculate ROI, subtract the amount spent on the campaigns from the revenue the campaigns made. This number is then divided by the amount spent. The formula is as follows:
ROI = (Revenue – Cost) / Total Cost
Another similar term, Return on Ad Spend (ROAS), compares how much was earned with how much was spent. It provides insight into your online marketing efforts and whether they are profitable. When you have made it clear to yourself how much ROAS you need to achieve, you will no longer run into limitations in your budget. You know what every dollar you invest will yield when you have established your ROAS. This allows you to spend more, as long as the ROAS stays at the same level.
ROAS = Revenue / Advertising Cost
What is the difference between ROAS and ROI? The difference is that ROAS focuses on revenue while ROI focuses on net profit. The Return on Ads Spend only considers the amount spent directly on the ads. Return on Investment takes into account not only expenses but also additional costs, such as production costs and overheads.