How exactly does ROAS(Return on Advertising Spending) Work?

Question

How exactly does ROAS(Return on Advertising Spending) Work?

In: Economics

Answer 1

It’s a calculation of how effective advertising was.

Let’s say with zero ads on average Company makes $5 million a year in revenue consistently (just to remove that variable). They spend $200k on ads and their revenue grows to $5.4 million. That extra $400k could then be attributed to buying ads. There’s the return on their spending.