Return On Ad Spend ROAS

Return on ad spend is one small sum. You take the money the adverts brought in and divide it by the money you paid for those adverts. So if you spend 1,000 and sell 4,000, your return on ad spend is 4, which most people say out loud as four times and write as ROAS.

The number is popular because it takes ten seconds to work out and every ad platform prints it for you. It also answers a fair question, which is how much came back out for every pound put in. Used carefully, it pulls the monthly meeting away from likes and towards money.

Now the trap that costs shops real money, because four times sounds like a clear win. Say those 4,000 in sales are goods that cost you 2,800 to buy, plus another 400 in packing and delivery. Add the 1,000 you paid the platform and you are 200 short. The campaign looked like a winner on the screen and lost money in the bank, which is why you work out your break-even before you start. If you keep 30 of every 100 as gross margin, you need about 3.3 times simply to stand still. Linkysoft asks a shop for its margin before it asks for the advertising budget, and this sum is the reason.

The second problem is the figures themselves. Ad platforms count a sale at the value the browser reported at the checkout. They rarely hear about the cancelled order, the refund or the parcel that came back unpaid, so the number on the screen is always a little kind. The honest version comes from your own system instead, matched to the adverts by date and by campaign. Shops running Storek already have that in one place, because the order, the cost price and the return all sit on the same record.

One habit is worth building, and that is reading the figure over a month rather than a day. Daily numbers jump for reasons that have nothing to do with the advert, like a public holiday or a delivery that ran late. In a Linkysoft digital marketing report the return sits on the same line as the gross margin and the refund rate. Alone, none of the three tells you much, which is why they are read together. Ask any agency for that view before you sign, and if the only number they can show you is the platform's own, treat that as your answer.