What Is ROAS?
ROAS is an acronym that stands for ‘return on ad spend’. Similar to ROI or ‘return on investment’, ROAS is used to measure the monetary success of advertising efforts. It depicts how much money you make by spending on advertising. For example, an ROAS of $10 depicts that the advertiser makes $10 for every dollar that they spend on advertising.
ROAS is an important metric in the realm of advertising and can be calculated for specific campaigns, or specific channels, or for the entire advertising budget. That means, ROAS can be used to measure the impact of advertising as a whole, or the impact of campaigns and channels. This information is worth its weight in gold as it can inform optimisation decisions that drive more sales at a lower cost.
Calculating ROAS uses a simple formula. Simply divide the revenue of sales resulting from the campaign you are evaluating with the total ad spend of the campaign. For instance, if a campaign has delivered business of $10,000 after a spend of $5000, your ROAS is $2. The same result can also be expressed through a ratio of 2:1. It is worth noting that ROAS is not a complete measure of profitability. It only measures the profitability of your advertising efforts. In order to calculate overall profitability, it is important to factor in the cost of operations and/or production.
To explain this with our previous example, if you are spending $5000 on advertising and making $10000 in sales, but the production cost of the products you sell is $1000, your ROAS and ROI will be different. In this example, while your ROAS is $2, your ROI is $1.66, after factoring in your production costs.
Because the production or operational costs of different businesses varies, the ROAS required to be profitable will also vary. For some businesses, generating an ROAS of $5 barely makes the wheels turn and for some others, even an ROAS of $2 might be enough to flourish. That said, something that negatively influences the ROAS of any ad campaign by any business is ad fraud.
How does it happen? How severe can the impact be? What can you do about fraud detection? How can you protect your ad campaigns from ad fraud and maintain a high ROAS? Read on to find the answers to these questions.
Impact Of Ad Fraud On Advertising ROAS
Ad fraud is the term used to refer to any act of duping advertisers into paying for fake clicks or impressions. Ad fraud is a widely pervasive problem that plagues the campaigns of thousands of businesses and costs them billions of dollars in lost revenues.
Victims of ad fraud are paying for fake clicks and impressions, which directly and negatively affects the revenue they can get from their advertising investment. This means, ad fraud diminishes the ROI and ROAS of your ad campaigns.
Another problem with ad fraud that is often overlooked is that it negatively influences an advertiser’s ability to make optimization decisions. Since fake clicks are registered as a result of ad fraud, advertisers may have a hard time accurately reporting the performance of their campaigns. Fake clicks may lead an advertiser to believe that fraudulent publishers are driving the highest number of clicks, leading to skewed reporting. Skewed reporting, in turn, may lead to the advertiser making bad optimization decisions and ending up wasting even more of their advertising budget.
Thankfully, advertisers are not powerless against ad fraud. Using click fraud detection, advertisers can identify instances of fraud and take steps to protect their campaigns.
How can you do that? Will it help improve ROAS? Let’s find out.
Improving ROAS With Fraud Detection
Ad fraud detection, as the name suggests, enables advertisers to detect instances of ad fraud. While manual monitoring can be used for ad fraud detection, it doesn’t provide a foolproof solution. This is because manual monitoring is prone to human error and biases. A better way to execute fraud detection is to employ a reliable fraud detection tool. A good such ad fraud solution will continuously monitor your campaigns and highlight and block any instances of fraud that are detected.
With fraud being eliminated from your campaigns, you can rest assured that you are getting the most of your advertising dollars.
Conclusion
While there are many challenges in maintaining a positive and high ROAS with digital advertising, ad fraud and its impact on ROAS is often overlooked. The reality is that ad fraud has a direct impact on the success of your advertising efforts and investment. With the right ad fraud detection tool, you can protect your campaigns from the plague that is ad fraud and ensure that your campaign reports always paint the full picture, enabling you to make better and impactful optimization decisions.
No comments yet