ROAS/ROI in Google Ads Campaigns: What You Need to Know

Measuring and enhancing the results of your Google Ads campaigns is essential for understanding the effectiveness of any changes you make to the ad creatives, audience targeting, and bidding strategy. 

However, should you measure ROI or ROAS? Are they the same thing or uniquely distinct? Keep reading to learn the difference, formulas, and reasons behind these two KPIs.

ROI vs ROAS: What’s the Difference

You’ve likely seen ROI and ROAS in your dashboards and may see some people use these KPIs interchangeably. 

Both methods of understanding your campaigns are calculated similarly, but it’s essential to hone in on the difference between them:

• Return on Investment (ROI): This KPI refers to the amount of profit generated from your investment. This means ROI considers all expenses of the campaign and profit margins for products sold. It’s an important campaign that takes more of a long-term view of your campaigns.
• Return on Ad Spend (ROAS): While ROAS is similar to ROI, one of the core differences is the level at which you’re calculating results. ROAS is calculated on a per-campaign basis. Additionally, ROAS is concerned with a direct relationship between money spent and revenue generated — it is not exclusively calculating profits.

You can see how they’re not as similar as they seem at first glance. So let’s explore how you calculate both and why it’s worth measuring both.

How to Calculate Google ROAS and ROI

You can track Google Ads ROI within the platform if you set up conversion tracking within Google Analytics, which sets up an automated Google Ads ROI calculator. The exact process allows you to track ROAS for individual campaigns without crunching the numbers.

The formulas for these KPIs are:

ROAS = (Total Revenue from Ads / Total Ad Spend) * 100

ROI = (Net Profit* / Total Expenses) * 100

(*Net profit is reached by deducting total expenses from total revenue)

Solely considering how much Google Ads costs is essential, but you can see how it fails to consider the results from those costs.

Additionally, you can go a step further by considering how other eCommerce and SaaS businesses within your industry are performing. Below, you can see how our platform equips you with real-time return on ad spend benchmarks based on a tiered breakdown of your competitors.

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Should You Monitor Both KPIs?

Yes, you should undoubtedly monitor both because these KPIs are more different than they seem at first glance. As such, you should certainly calculate and monitor both metrics over time to understand how your Google Ads campaigns are performing.

Even Google’s own support pages give you advice for measuring ROI, while the Google Adwords dashboard provides ROAS (when properly configured). Your Google Ads ROI highlights the overall effectiveness of your ad campaigns, while ROAS provides insights into specific campaign results and focuses on revenue.

Best Practices to Maximize ROAS Google Ads Campaigns

We’ve seen how ROI is better used for a long-term view and evaluating several campaigns, while ROAS is more granular. As such, focusing on measuring your ROAS for each campaign will help you maximize revenue Google Ads with every new campaign.

Run Continuous Tests

Testing is crucial for every marketing campaign and platform; Google Ads is no exception. Run tests for different target keywords, audiences, ad creatives, and campaign types.

It’s vital that you take a scientific approach to your tests. That means changing one variable at a time and keeping everything else the same, like time frame and budget. For example, run your first campaign for 60 days, then evaluate your results and refine audience targeting for the next 60 days.

When it comes to different campaign types, you’ll likely need to change the budget as they have different costs. So when running these experiments, use the same budget for each campaign type and compare other KPIs, like conversion rates, to the other types of campaigns you’re running.

Explore Different Campaign Types

Google offers many types of campaigns that are worth exploring based on your business and current objectives. Let’s briefly explore these campaigns so you can start thinking about which types of ads might work best for you:

• Performance Max: Google is pushing Performance Max campaigns as a goal-based option that leverages AI to use all available channels with one campaign. It can be an excellent choice for many businesses.
• Search: Most people think of Search campaigns when they think of Google Ads. These ads are text ads on search results pages and are ideal for driving traffic to your site.
• Display: The other side of Google Ads is AdSense, which site owners use to monetize their own sites. Display ads put image-based ads throughout those websites to boost reach, sales, and awareness.
• Videos: YouTube is powered by this campaign type, which places ads before, during, or after the video. Your campaign can also leverage partner tube sites and embeds, placing your videos in front of a wider audience.
• Apps: This type of campaign is specific for advertising an app, making it a great option for SaaS companies.
• Local: A local ad leverages multiple channels to help bring people into your brick-and-mortar store. Google Maps, Search, Display, and even YouTube can also use geolocation data to reach people in your area.
• Smart: These campaigns are essentially a different take on the same benefits as Performance Max; they use AI to maximize results. It’s unclear if Google plans to phase out Smart campaigns.
• Shopping: Google’s Shopping campaigns are crucial for eCommerce sites. You’ll need to generate product feeds, keep them updated, and let Google handle the rest. You don’t set any keywords, with the platform instead using your product feed to decide when to display your products.

You can see how there're plenty of ways to enhance your ROI in Google Ads. Explore different campaigns, monitor changes in ROI and ROAS, and keep maximizing your ad dollars.

Refine Audience Targeting

Audience targeting is at the core of most Google campaigns. You can use past campaigns and existing customer data to help gain an understanding of your ideal target audience. From there, you can keep refining audience targeting over time to reach people ready to learn more about your company.

What if you’re a brand-new business? You can look at available demographic data about your industry, even if it’s not related to advertising. Additionally, you can look at the followers of your competitors on social media to gain a rough idea of who they target.

Launch your first campaign with these best guesses, and then pay close attention to audience data once complete. You’ll be on your way to targeting the right people.

Always Evaluate Campaign Results

Diving into the results of every campaign is absolutely critical to improving your next campaign. Every type of Google Ads campaign produces a wealth of data that can be overwhelming, but take the time to understand each KPI and gain insights from them.

ROAS is an excellent cornerstone metric for understanding your results and will be calculated for you, provided you set up conversions properly. Other metrics to consider are conversion rates and average order value, both of which also need to be set up properly.

It’s tempting for advertisers to focus on costs and try to bring them down. But keep the big picture in mind — a high-cost campaign is worth it when it brings in more profit than it costs. Properly evaluating your campaigns is how you maximize your budget beyond just trying to make it cheaper.

Focus on the Entire Customer Journey

Remember, both ROI and ROAS depend on making sales. A great ad is the first step, but it isn’t the last. You need to increase your conversion rate in tandem with fine-tuning your ads to get the best results.

Every element of your website, from the landing page to finishing the checkout process, influences the customer journey. Evaluate all usage data from your analytics trackers and identify any chokepoints, which are areas where a significant amount of visitors leave the site.

Chokepoints can be created by a malfunctioning page during the checkout process or something related to your policies. For example, if the customer reaches the stage where they see how much shipping costs and it’s more than expected, this can become a significant chokepoint.

Strive to create a positive customer experience from start to finish so that any traffic gained from your Google Ads has the best chance of generating new sales.

Look At Your Competitors’ Campaigns

You can clearly see your competitor’s ads when searching your target keywords or watching videos related to your industry. Look for the ads of the your competitors, both large and small, and ask the following questions:

• How are they crafting their ads?
• What pain points do they highlight? 
• What tone do they use to talk to the audience?

Without using a tool like Varos, you won’t be able to see any metrics or results. However, even just considering their campaigns can go far in helping you refine your own. 

Develop Intriguing Ad Creatives

Ad creatives are vital to the success or failure of your ad campaigns. Don’t make the mistake of spending all your time changing how you configure campaigns and neglect the ads themselves.

Experiment with different headlines, text, videos, or images that showcase your product or service in compelling ways. Focus on one of your selling points for a few campaigns, and then focus on another. Which campaign was more intriguing to your target audience?

Dynamic Search Ads are also worth exploring for most businesses. This type of Search ad doesn’t require any ad creatives and instead generates ads based on the content of the site you’re advertising. You may end up with better results in some instances, so run a few Dynamic Search campaigns and monitor the results.

Ultimately, the ad creatives are what compel someone to click on the ad, and everything else is just making sure the ad is shown to the right people and is cost-effective. Keep exploring new ways to convey what makes your business amazing to grow your ROI and ROAS.

Partner with Varos to Unlock More Data to Drive Your Decisions

Measuring ROI and ROAS are both crucial to strategically evaluating the success or failure of your Google Ads efforts. Over time, you’ll be able to see if you’ve been able to maximize your ad spend, if campaigns are losing effectiveness, or if you’ve hit a plateau. 

You can go a step further by unlocking real-time peer benchmarking for Google Ads campaigns. That’s why Varos offers a unique platform aggregating and analyzing results from other businesses within your industry. 

Below, you can see how Varos compares your Google Ads ROAS right alongside a tiered breakdown of your competitors. You’ll have more information to help guide your decisions to make sure you always stay ahead of the pack.

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Is it time to understand the complete story behind your ROI and ROAS with real-time competitor benchmarking? Sign up today or contact us for a demo to see how Varos can help.

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About the Author

Sarah Clowes-Walker 

Head of Marketing at Varos

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