Return on ad spend
ROH-az
Revenue generated per dollar spent on advertising. A ROAS of 5:1 means every $1 in ad spend generated $5 in revenue.
ROAS is the simplest measure of advertising efficiency: revenue divided by ad spend. If you spent $50k on ads and generated $250k in pipeline that closed $150k in revenue, your ROAS is 3:1.
ROAS is more useful than CPC or CPM because it connects spend to revenue. A campaign with expensive clicks but high conversion can have excellent ROAS. A campaign with cheap clicks but no conversions has zero ROAS.
The challenge with ROAS in B2B is attribution. Enterprise deals have long sales cycles and multiple touchpoints. The ad click might have happened six months before the deal closed. Attributing revenue to specific ads requires attribution models, and every model has limitations. Report ROAS with honest caveats about attribution.
Examples
A LinkedIn campaign measures ROAS.
Ad spend: $30k over the quarter. Pipeline generated from ad-sourced leads: $400k. Closed revenue: $120k. ROAS: 4:1. The campaign paid for itself four times over.
ROAS varies by campaign type.
Retargeting campaigns: 8:1 ROAS (reaching people who already know you). Prospecting campaigns: 2:1 ROAS (reaching new audiences). Brand campaigns: no measurable ROAS in the short term. Each campaign type serves a different purpose and should be measured differently.
ROAS misleads with long sales cycles.
Q1 ad spend: $50k. Q1 closed revenue from ads: $20k. ROAS looks bad at 0.4:1. But $300k in pipeline from Q1 ads closes in Q3. Actual ROAS: 6.4:1. Measuring ROAS on the same quarter's spend and revenue understates the true return for B2B companies with multi-month sales cycles.
In practice
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Frequently asked questions
What is a good ROAS for B2B?
3:1 is the minimum viable ROAS (spend $1, get $3 in revenue). 5:1 or higher is strong. Below 2:1 and the campaign is not covering its costs plus the operational overhead of managing it. Remember to factor in the full sales cycle when calculating ROAS for B2B.
What is the difference between ROAS and ROI?
ROAS measures revenue relative to ad spend only. ROI measures profit relative to total investment including ad spend, salaries, tools, and overhead. ROAS is a marketing metric. ROI is a business metric. A campaign with 5:1 ROAS can still have negative ROI if the operational costs are high.
Related terms
The cost to acquire a customer or conversion through a specific marketing channel. The bottom-line efficiency metric for paid campaigns.
How much you pay each time someone clicks your ad. The basic unit of cost in pay-per-click advertising.
Any marketing channel where you pay for visibility: search ads, social ads, display ads, sponsorships, and paid content placements.
The profit or value generated relative to the cost of an investment. The universal metric for whether something was worth doing.
The percentage of people who take a desired action. Visitors who sign up. Leads who become customers. The measure of how well each stage of the funnel works.
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