You have often heard of return on investment, or ROI as we call it in business jargon.
In the world of Google Ads (and in the PPC segment as a whole) there is a fundamental metric that is often unknown or not given the importance it deserves.
ROAS (Return on Ad Spend) is the % return generated by a Google Ads campaign.
An ROAS of 400% indicates that this campaign has generated €4 for every €1 invested in Google Ads. We can also talk about this as a 4:1 ratio.
Companies often contact me and show me current or old Google Ads reports and tell me about data such as impressions and clicks.
Several pieces of information are important depending on the needs of the Google Ads account and the client's goal.
But if we don't measure conversions (I recommend reading the article I wrote about The Importance of Measuring Conversions in Google Ads), we can't measure ROAS.
And measuring ROAS is essential for two reasons:
1. Good campaign performance in terms of CTR, impression share and positioning does not always mean that a campaign generates revenue (this is where 95% of advertisers get it wrong).
2. It is the only important metric, especially in e-commerce and lead generation, for measuring the sales performance of Google Ads campaigns.
Worldwide, Google Ads accounts have an average ROAS of 200% – a 2:1 ratio, meaning
every €1 invested in Google Ads campaigns generates an average of €2.
I am often asked what a "good" ROAS is for a company, advertiser or agency. It depends a lot – a whole lot – on the market you operate in, where you advertise, who you advertise to and the average volume of e-commerce sales or lead-to-customer conversion rate in lead generation campaigns.
A professionally managed Google Ads account can and should generate an ROAS of 400% to be considered top tier.
Let's take a look at some data from Biriwuanga:
As you can see, for the accounts we manage, in the last 2 days we have generated around 7000 conversions for our clients, with an average ROAS of 1735%, or 17:1 if you prefer.
Every €1 invested in Google Ads has generated €17 for our clients.
I always like to show the averages of several accounts, because it would not be transparent to show the ROAS of only the best account.
In case you're curious, we have a PMax campaign that so far this month has reached an ROAS of 75,000%, or 750:1.
This is clearly not usual, but it’s interesting to see the real potential of Google Ads:
If you're not calculating the ROAS of your Google Ads campaigns, you should know that your competitors are, so I recommend you start calculating it as soon as possible.
(In the photo we are at the Google Engineering Hub in Zurich, Switzerland).
On to the next conversion with Google Ads!
Dean.
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