How to Calculate Return on Ad Spend in Shopify
Learn how to calculate Return on Ad Spend (ROAS) with revenue and costs. Track ROAS data on your Facebook, Instagram, and Google accounts
Optimizing your Return on Ad Spend is one of the best ways to improve your marketing strategy and overall profitability. By definition, Return on Ad Spend (ROAS) is “a marketing metric that measures the efficacy of a digital advertising campaign” (thanks, BigCommerce!). In other words, we like to look at it as the bang for your buck with online ads. While ROAS seems simple on the surface, it gives valuable insights into areas of future growth and improvement. We'll take you through how to calculate this metric, how to understand it in the context of your industry, and how to apply it to the platforms you're using now.
How to Calculate Return on Ad Spend
You can calculate ROAS by dividing total revenue from ads by total ad spend. ROAS can be assessed for various time-periods (i.e. day, week, month, year) and, if your advertising efforts are tied to certain platforms or campaigns, you can assign a specific ROAS for each.
If you’re confused about how to define total revenue from ads and total ad spend, we’ve included some nifty definitions and examples below:
- Total revenue from ads is how much money you’ve gained from advertising. For instance, if someone clicked an ad and then bought a $100 product from your website, that would create $100 in revenue from ads.
- Total ad spend is, inversely, how much money you’ve spent on advertising. For a pay-per-click (PPC) model, your total ad spend is your average cost-per-action (CPA) times total number of actions. We’ll discuss this model more when talking about Google Ads, Facebook Ads, and Linkedin Ads below!
When choosing what to include in your calculations, remember: consistency is key! That means, if you decide to include XYZ in your ROAS for the month, you should include it in the next month’s ROAS as well. Having consistent metrics will allow you to better identify the causes of good or bad performance. For instance, if, over the past few months, you’ve tweaked your ad’s headline and ROAS has increased, then you’ll know that action helped improve the ad’s effectiveness!
How to Calculate Metric in Shopify
It can be difficult to calculate this metric in Shopify, but we have a quick and easy solution, Lido.app. Read below to learn more and get started today.
What is Lido?
Lido allows you to connect, analyze, and visualize all of your data in a single spreadsheet. Don't wait for engineers to build analysis dashboards! Lido provides a simple and easy solution to importing data from numerous platforms. Automatically import data from your favorite platforms such as Shopify, Facebook, Google Analytics, and many more and apply Lido's software to extract meaningful metrics from them. After applying Lido software to your data, you will be left with sleek, attractive dashboards to share with your stakeholders, rather than confusing and jumbled raw data. Furthermore, the dashboards are easily editable to focus on specific data or metrics.
Sign up for free and get started today.