Return on Investment (ROI) is one of the more important metrics in Google Ads. It…
Google Ads Return On Investment (ROI) is a metric that helps you to see how well your campaigns are performing. It calculates the amount of revenue you make for your total investment in Google Ads.
In Google Ads we often refer to Return On Ad Spend (ROAS) instead, which is a good metric to track and even has a bid strategy attached to it. It helps you to easily see what return you’re getting from your budget investment.
ROAS is a metric that measures revenue earned for each £1 that you spend. And by calculating and tracking it, you get insights on the effectiveness of your advertising.
ROI and ROAS are slightly different metrics and it’s important to know what they each mean. With ROI you are focusing on total return for your efforts in Google Ads including outside help you’ve paid for and any amount you’ve spent. So it’s all encompassing and covers all costs associated with your account, which can be helpful.
With ROAS you’re calculating just the return from the amount you’ve spent advertising your products or services. It can also be calculated for specific products, ads, keywords, campaigns and others.
So, ROAS tends to be more important in Google Ads however we often use these interchangeably.
To calculate ROAS you divide the revenue attributed to your campaign by the cost of the campaign. If for example your revenue is £3000 and cost is £1000, then your ratio is 3:1 or 300%.
One of the most effective ways to monitor and achieve your targeted return on ad spend (ROAs) is to use the ROAS bid strategy. This is an automated bid strategy that is connected to the Maximise Conversions bid strategy.
It’s usually best to change to this bid strategy later when you’ve received a significant amount of traffic.
If for example you want to make £5 for every £1 you spend, you’d set a 500% ROAS. But be careful about setting it too high because that could affect the automated bidding and you could be outbid by competitors and not get clicks or conversions.