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Defining & Calculating Return on Ad Spend (ROAS)

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Defining & Calculating Return on Ad Spend (ROAS)

Wondering how to calculate ROAS? This oft-spotted acronym is an integral part of gauging the success of certain advertising efforts within a given marketing strategy. Whether you’re looking for info to boost your general knowledge base or want to understand the relationship between ROAS and campaigns, this quick guide has you covered.
 

What Is ROAS?

 
ROAS stands for “return on advertising spend.” This calculation is used to measure how much revenue a specific advertising campaign is bringing in compared to the amount of money spent on ads related to that campaign.

People tasked with managing ad accounts rely on ROAS to convey how cost-effective a campaign truly is. This is an objective and quantitative way to understand how a new ad campaign is running, but you can also use ROAS to find out whether an existing campaign is trending in the right direction.
 

How to Calculate Return on Ad Spend (ROAS)

 
It’s quite easy to calculate ROAS. Simply identify the revenue brought in by your ad campaign and divide that number by the cost of that same campaign. For example, if your ad spend totals $2,000 and your total ad revenue is $4,000, your ROAS calculation would be $4,000 divided by $2,000 = 200% (or a 2:1 ratio).

To make things even easier, you can use an online ROAS calculator to quickly determine how ad spend and ad revenue are playing out on a given campaign. All you need is your total ad spend and revenue, and the calculator does the rest.
 

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Why Do Marketers Calculate ROAS?

 
Marketers measure ROAS to see how effective their ad campaigns truly are. This is a major step toward discerning whether a campaign is tracking toward pre-determined goals or falling short of expectations. Calculating ROAS early on in the campaign (and then at regular milestones moving forward) also helps marketers optimize advertising spend, as they can opt to decrease spending for low-performing campaigns and reallocate those funds to high-performing campaigns.

The information offered by ROAS can also help determine the wider direction of your marketing strategy. One relatively simple calculation gives you hints as to what campaigns, content types and distribution channels your target demo may be responding to most.
 

What’s Considered a Good ROAS?

 
Good ROAS is a relative concept that depends heavily on the goal of your campaign and the averages for your industry. For instance, if your goal is to drive awareness of a new streaming service, you may be okay with a lower ROAS because that number reflects conversions rather than awareness. When you’re measuring ROAS early on in the buyer’s journey, the numbers just may not be as impressive.

High ROAS matters more when your advertising strategy focuses on getting upfront revenue from a customer base that typically has a lower lifetime value. You want to see ROAS that are above the oft-cited 4:1 benchmark because it’s understood that will likely follow a downward trend over time.
 

How ROAS Relates to Profit and ROI

 
ROAS and ROI are often conflated, which makes sense when you realize that ROAS is basically one spoke in the ROI wheel. ROI stands for “return on investment,” which is a more long-term measurement of the return you get from larger marketing and advertising efforts. This includes things like fees paid to an SEO agency or your freelance video editing team. ROAS is a more short-term measurement that focuses solely on whether ads are driving revenue.

ROI also takes net profit into account (ROI is calculated as Net Profit divided by Net Spend), while ROAS deals with revenue and ad cost.

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Many marketers choose to measure both ROAS and ROI, as the metrics combined can help the powers that be understand campaign performance and how it contributes to the business’s success and bottom line.
 

Key Factors & Considerations for an Accurate ROAS Calculation

 
Because you’re likely using ROAS to determine the future of your ad campaign, it’s crucial your calculations are as accurate as possible.

Here are some things to consider as you work with ROAS, plus a few tips on how you can ensure your numbers are right on the mark.
 

Don’t Forget the Fees

 
Some marketers prefer to calculate ROAS based solely on ad costs, but it can be helpful to take peripheral expenses into account as well.

If you’ve decided to include all ad-associated costs in your ROAS calculation, you’ll need to round up receipts that reflect fees paid out while executing the campaign. This includes vendor fees and transaction fees, like the percentage PayPal takes when charging for goods and services or the rate platforms charge to facilitate a campaign. Mine your accounts for other less conspicuous charges like commissions and relevant employee expenses, too.
 

Popularity Pays Off

 
Remember how we said good ROAS is all relative? Here’s another example of that. Brands new to the market are likely to have lower ROAS because they’re shouldering the entire cost of raising awareness and acquiring those customers. Existing brands launching a new campaign might have a high ROAS right off the bat because they’re able to leverage brand familiarity and established relationships.
 

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Known When to Hold ‘Em — and When to Fold ‘Em

 
It’s vital to understand when ROAS percentages should be worrisome and when you just need to wait out a slump. Typically, ROAS below 300% is cause for concern, meaning you either need to revamp and reoptimize your campaign or consider pulling it altogether. Re-optimization could mean:

  • Changing up the demographic you’re targeting
  • Trying new ad types and channels
  • Tweaking pricing or the type of promotional offer attached to the campaign
  • Reworking the actual look and feel of your ads — perhaps hiring a writer to change the tone of the service description or changing up the imagery

But sometimes, especially when a company or service offering is brand new, ramping up ROAS just takes time.
 

Avoid Relying on ROAS Alone

 
ROAS is important, but it shouldn’t be evaluated in a vacuum. Instead, look at ROAS in relation to other factors such as the goal of your advertising campaign and conversion factors like click-through rates to get a better understanding of the overall health of your initiative. Actual numbers matter too — you could have a high ROI and still lose money if production costs are overwhelming.

“We are very data-driven and everything we do has to have a KPI associated with it. ROAS is only one point in the picture and it’s not always even the most important one. People can get very focused on ROAS but especially in the testing and trying phase, there’s a lot of learnings and KPIs that could make more sense.”

– Maya Wasserman | Head of Marketing / Director of Marketing Communications, Sony (Source)

 

Conclusion

 
Determining how to calculate ROAS is important, but it’s arguably even more critical to understand why ROAS matters and what role it plays in strategizing and executing effective ad campaigns. These concepts become even more important in niches like non-click-based media, like Streaming.

For example, at Tinuiti we often see marketers struggling to measure the full impact and demand of ad campaigns and consumer activity. But make no mistake, Streaming drives ROAS and we can prove it. Our patented solution, powered by Bliss Point technology, intelligently applies modern machine learning and optimization techniques to the non-click-based Streaming environment. That’s a fancy way of saying we can prove the channel is working with our highly technical attribution tools, even without a clickstream. That’s good news for high-growth brands looking to efficiently scale streaming campaigns with full-funnel attribution.

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Want to learn more about the relationship between streaming and bottom of the funnel channels? Be sure to register for our upcoming webinar “Streaming Ads that Work – and Why”  Streaming+ today.

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How To Combine PR and Content Marketing Superpowers To Achieve Business Goals

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A figure pulls open a dress shirt to reveal the term PR on a Superman-like costume, reflecting the superpower resulting from combining content and PR.

A transformative shift is happening, and it’s not AI.

The aisle between public relations and content marketing is rapidly narrowing. If you’re smart about the convergence, you can forever enhance your brand’s storytelling.

The goals and roles of content marketing and PR overlap more and more. The job descriptions look awfully similar. Shrinking budgets and a shrewd eye for efficiency mean you and your PR pals could face the chopping block if you don’t streamline operations and deliver on the company’s goals (because marketing communications is always first to be axed, right?).

Yikes. Let’s take a big, deep breath. This is not a threat. It’s an opportunity.

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Reach across the aisle to PR and streamline content creation, improve distribution strategies, and get back to the heart of what you both are meant to do: Build strong relationships and tell impactful stories.

So, before you panic-post that open-to-work banner on LinkedIn, consider these tips from content marketing, PR, and journalism pros who’ve figured out how to thrive in an increasingly narrowing content ecosystem.

1. See journalists as your audience

Savvy pros know the ability to tell an impactful story — and support it with publish-ready collateral — grounds successful media relationships. And as a content marketer, your skills in storytelling and connecting with audiences, including journalists, naturally support your PR pals’ media outreach.

Strategic storytelling creates content focused on what the audience needs and wants. Sharing content on your blog or social media builds relationships with journalists who source those channels for story ideas, event updates, and subject matter experts.

“Embedding PR strategies in your content marketing pieces informs your audience and can easily be picked up by media,” says Alex Sanchez, chief experience officer at BeWell, New Mexico’s Health Insurance Marketplace. “We have seen reporters do this many times, pulling stories from our blogs and putting them in the nightly news — most of the time without even reaching out to us.”

Acacia James, weekend producer/morning associate producer at WTOP radio in Washington, D.C., says blogs and social media posts are helpful to her work. “If I see a story idea, and I see that they’re willing to share information, it’s easier to contact them — and we can also backlink their content. It’s huge for us to be able to use every avenue.” 

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Kirby Winn, manager of PR at ImpactLife, says reporters and assignment editors are key consumers of their content. “And I don’t mean a news release that just hit their inbox. They’re going to our blog and consuming our stories, just like any other audience member,” he says. “Our organization has put more focus into content marketing in the past few years — it supports a media pitch so well and highlights the stories we have to tell.”

Storytelling attracts earned media that might not pick up the generic news topic. “It’s one thing to pitch a general story about how we help consumers sign up for low-cost health insurance,” Alex says. “Now, imagine a single mom who just got a plan after years of thinking it was too expensive. She had a terrible car accident, and the $60,000 ER bill that would have ruined her financially was covered. Now that’s a story journalists will want to cover, and that will be relatable to their audience and ours.” 

2. Learn the media outlet’s audience

Seventy-three percent of reporters say one-fourth or less of the stories pitched are relevant to their audiences, according to Cision’s 2023 State of the Media Report (registration required).

PR pros are known for building relationships with journalists, while content marketers thrive in building communities around content. Merge these best practices to build desirable content that works for your target audience and the media’s audiences simultaneously.

WTOP’s Acacia James says sources who show they’re ready to share helpful, relevant content often win pitches for coverage. “In radio, we do a lot of research on who is listening to us, and we’re focused on a prototype called ‘Mike and Jen’ — normal, everyday people in Generation X … So when we get press releases and pitches, we ask, ‘How interested will Mike and Jen be in this story?’” 

3. Deliver the full content package (and make journalists’ jobs easier)

Cranking out content to their media outlet’s standards has never been tougher for journalists. Newsrooms are significantly understaffed, and anything you can do to make their lives easier will be appreciated and potentially rewarded with coverage. Content marketers are built to think about all the elements to tell the story through multiple mediums and channels.

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“Today’s content marketing pretty much provides a package to the media outlet,” says So Young Pak, director of media relations at MedStar Washington Hospital Center. “PR is doing a lot of storytelling work in advance of media publication. We (and content marketing) work together to provide the elements to go with each story — photos, subject matter experts, patients, videos, and data points, if needed.”   

At WTOP, the successful content package includes audio. “As a radio station, we are focused on high-quality sound,” Acacia James says. “Savvy sources know to record and send us voice memos, and then we pull cuts from the audio … You will naturally want to do someone a favor if they did you one — like providing helpful soundbites, audio, and newsworthy stories.”  

While production value matters to some media, you shouldn’t stress about it. “In the past decade, how we work with reporters has changed. Back in the day, if they couldn’t be there in person, they weren’t going to interview your expert,” says Jason Carlton, an accredited PR professional and manager of marketing and communications at Intermountain Health. “During COVID, we had to switch to virtual interviewing. Now, many journalists are OK with running a Teams or Zoom interview they’ve done with an expert on the news.”

BeWell’s Alex Sanchez agrees. “I’ve heard old school PR folks cringe at the idea of putting up a Zoom video instead of getting traditional video interviews. It doesn’t really matter to consumers. Focus on the story, on the timeliness, and the relevance. Consumers want authenticity, not super stylized, stiff content.”

4. Unite great minds to maximize efficiency

Everyone needs to set aside the debate about which team — PR or content marketing — gets credit for the resulting media coverage.

At MedStar Washington Hospital Center, So Young and colleagues adopt a collaborative mindset on multichannel stories. “We can get the interview and gather information for all the different pieces — blog, audio, video, press release, internal newsletter, or magazine. That way, we’re not trying to figure things out individually, and the subject matter experts only have to have that conversation once,” she says.

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Regular, cross-team meetings are essential to understand the best channels for reaching key audiences, including the media. A story that began life as a press release might reap SEO and earned media gold if it’s strategized as a blog, video, and media pitch.

“At Intermountain Health, we have individual teams for media relations, marketing, social media, and hospital communications. That setup works well because it allows us to bring in the people who are the given experts in those areas,” says Intermountain’s Jason Carlton. “Together, we decide if a story is best for the blog, a media pitch, or a mix of channels — that way, we avoid duplicating work and the risk of diluting the story’s impact.”

5. Measure what matters

Cutting through the noise to earn media mentions requires keen attention to metrics. Since content marketing and PR metrics overlap, synthesizing the data in your team meetings can save time while streamlining your storytelling efforts.

“For content marketers, using analytical tools such as GA4 can help measure the effectiveness of their content campaigns and landing pages to determine meaningful KPIs such as organic traffic, keyword rankings, lead generation, and conversion rates,” says John Martino, director of digital marketing for Visiting Angels. “PR teams can use media coverage and social interactions to assess user engagement and brand awareness. A unified and omnichannel approach can help both teams demonstrate their value in enhancing brand visibility, engagement, and overall business success.”

To track your shared goals, launch a shared dashboard that helps tell the combined “story of your stories” to internal and executive teams. Among the metrics to monitor:

  • Page views: Obviously, this queen of metrics continues to be important across PR and content marketing. Take your analysis to the next level by evaluating which niche audiences are contributing to these views to further hone your storytelling targets, including media outlets.
  • Earned media mentions: Through a media tracker service or good old Google Alerts, you can tally the echo of your content marketing and PR. Look at your site’s referral traffic report to identify media outlets that send traffic to your blog or other web pages.
  • Organic search queries: Dive into your analytics platform to surface organic search queries that lead to visitors. Build from those questions to develop stories that further resonate with your audience and your targeted media.
  • On-page actions: When visitors show up on your content, what are they doing? What do they click? Where do they go next? Building next-step pathways is your bread and butter in content marketing — and PR can use them as a natural pipeline for media to pick up more stories, angles, and quotes.

But perhaps the biggest metric to track is team satisfaction. Who on the collaborative team had the most fun writing blogs, producing videos, or calling the news stations? Lean into the natural skills and passions of your team members to distribute work properly, maximize the team output, and improve relationships with the media, your audience, and internal teams.

“It’s really trying to understand the problem to solve — the needle to move — and determining a plan that will help them achieve their goal,” Jason says. “If you don’t have those measurable objectives, you’re not going to know whether you made a difference.”

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Don’t fear the merger

Whether you deliberately work together or not, content marketing and public relations are tied together. ImpactLife’s Kirby Winn explains, “As soon as we begin to talk about (ourselves) to a reporter who doesn’t know us, they are certainly going to check out our stories.”

But consciously uniting PR and content marketing will ease the challenges you both face. Working together allows you to save time, eliminate duplicate work, and gain free time to tell more stories and drive them into impactful media placements.

Register to attend Content Marketing World in San Diego. Use the code BLOG100 to save $100. Can’t attend in person this year? Check out the Digital Pass for access to on-demand session recordings from the live event through the end of the year.

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Cover image by Joseph Kalinowski/Content Marketing Institute

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Trends in Content Localization – Moz

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Trends in Content Localization - Moz

Multinational fast food chains are one of the best-known examples of recognizing that product menus may sometimes have to change significantly to serve distinct audiences. The above video is just a short run-through of the same business selling smokehouse burgers, kofta, paneer, and rice bowls in an effort to appeal to people in a variety of places. I can’t personally judge the validity of these representations, but what I can see is that, in such cases, you don’t merely localize your content but the products on which your content is founded.

Sometimes, even the branding of businesses is different around the world; what we call Burger King in America is Hungry Jack’s in Australia, Lays potato chips here are Sabritas in Mexico, and DiGiorno frozen pizza is familiar in the US, but Canada knows it as Delissio.

Tales of product tailoring failures often become famous, likely because some of them may seem humorous from a distance, but cultural sensitivity should always be taken seriously. If a brand you are marketing is on its way to becoming a large global seller, the best insurance against reputation damage and revenue loss as a result of cultural insensitivity is to employ regional and cultural experts whose first-hand and lived experiences can steward the organization in acting with awareness and respect.

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How AI Is Redefining Startup GTM Strategy

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How AI Is Redefining Startup GTM Strategy

AI and startups? It just makes sense.

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