Return on ad spend is calculated as follows:
ROAS = Revenue attributable to ads / Cost of ads
For example, if you invest $100 into your ad campaign and generate $250 in revenue from those ads, your ROAS is 2.5. (Hashtag: winning!)
There are several ways to determine the cost of ads. you may want to track just the actual dollar amount spent on a particular ad platform, whereas other times you may want to include additional advertising costs such as:
Salary Costs: The cost of in-house or contracted personnel who manage the ad campaign.
Vendor Costs: This includes fees and commissions from vendors that facilitate the ad campaign.
Affiliate costs: This can include individual affiliate commissions and any affiliate network fees.
Depending on the type of ad campaign you’re running, it’s often useful to calculate the ROAS purely based on ad costs, and a separate ROAS that includes these additional advertising expenses to get a more complete picture of the campaign’s profitability.