ROAS: the Most Important AdWords Metric
Over the last 5 years I have spoken to thousands of AdWords advertisers. I have consulted on their accounts. I have answered questions about quality score, CTR, conversions, CPC, and many other metrics.
During all these consultations I have noticed that almost every advertiser failed to ask to look at, what I feel is the most import metric, ROAS. ROAS, Return on Ad Spend, is not a metric you will find on your AdWords dashboard, it is not always an easy number to determine, but when it comes to any form of paid advertising you absolutely have to know how much money you are getting in return for every dollar you are spending on your advertising.
I have told many advertisers, “clicks are how Google makes money, conversions are how you make money”. Advertisers can understand that simple concept but when you take that thought one step further and ask advertisers what their ROAS is their eyes go blank. They usually have no idea what I am talking about.
Every business owner understands the term ROI, or Return on Investment, but ROAS is foreign to them. ROAS is just ROI as it refers more specifically to paid advertising. With AdWords, if you are going to spend $100 dollars you want to generate at least $101 in revenue from your ads.
What to Take From This
As long as you can keep your ROAS in the positive you will want to spend as much as possible with AdWords. If you are unable to generate a positive ROAS you will want to spend as little as possible until you can get that number into the positive. That is just basic economics. This is why Google has put so much effort into developing features such as conversion tracking, to help advertisers to determine this metric. Google realizes that advertisers, especially small businesses, can only advertise for a limited time with a negative ROAS but can advertise indefinitely with a positive ROAS.
So if you are not already able to determine your ROAS you need to learn how to do so as soon as possible. AdWords may be designed to be a self managed advertising platform but to hesitate to ask for help if you need it. Google’s AdWords Support Team is very knowledgeable and helpful and best of all their help is free. If you would like more hands on help, think about contacting an AdWords management specialist to help you, it will be money well spent.