ROAS STANDS FOR RETURN ON AD SPEND

And translated into Danish, it's more like "profit from what you've spent on advertising". It's a bit of a clumsy translation, but let's take a look at it.

When you advertise on Google Ads or Facebook Ads or Instagram Ads (which are three channels where many webshops spend money), you typically spend something per click. To give you an example, let's say you pay 4.50 for a click on Google Ads. If you've spent $4.50, you've gotten 1000 visitors. Unfortunately, not all of them convert into customers. If you're lucky, it's 3% of them.

3% of 1000 is 30. That means you can "buy" 30 new orders for 4500,-.

If these 30 customers have bought a total of 9750,-, you've invested 4500,- and received a turnover of 9750,-.

To calculate your ROAS, take what you've earned (your revenue) and divide by what you've invested. Then multiply by 100 to make it a percentage. So in this case, ROAS is (9750/4500)*100 = 216%.

Is that good or bad?

Yes - the problem with ROAS is that it's calculated based on your revenue and not your earnings. So if you have expenses for freight, products, handling, etc. for 6000,- then it has been a loss-making business.

That's why more and more people are starting to look at POAS, which stands for Profit On Ad Spend.

We know online marketing in Shoporama

We've been working with online marketing ourselves for decades. As the only shop system in the country, we have spoken multiple times at conferences such as Marketingcamp, SEOday, Shopcamp, Digital Marketing, E-commerce Manager, Ecommerce Day, Web Analytics Wednesday and many more.