What is Avg. Target ROAS?
Average target return on ad spend (Avg. Target ROAS) is a bidding strategy in Google Ads that allows advertisers to set a specific return on ad spend (ROAS) they wish to achieve from their advertising campaigns.
This bidding strategy helps advertisers maximize their advertising budget by automatically adjusting bids for each ad auction to reach their target ROAS.
- Avg. Target ROAS is a powerful bidding strategy that helps advertisers achieve their desired return on ad spend.
- This bidding strategy benefits e-commerce businesses that want to maximize revenue and profits from their advertising campaigns.
- It requires advertisers to set conversion tracking up correctly in Google Ads to measure the revenue generated from their campaigns.
How does it work?
Advertisers set a specific target ROAS, representing the revenue they want to generate for each dollar spent on advertising.
For example, if an advertiser sets a target ROAS of 500%, they want to get $5 in revenue for every $1 spent on advertising.
Google Ads will then adjust the bids for each auction to try to achieve this target ROAS.
- Increase the quality of your ad copy and landing pages to improve conversion rates and generate more revenue from each click.
- Use audience targeting to reach high-value customers more likely to convert and generate higher ROAS.
- Adjust your bid adjustments for device, location, and time of day to optimize your bidding strategy based on the performance of each audience segment.
Example of how to calculate Avg. Target ROAS:
Assume an advertiser spent $100 on advertising and generated $500 in revenue.
Their ROAS would be calculated as follows:
ROAS = (Revenue / Cost) x 100%
ROAS = ($500 / $100) x 100%
ROAS = 500%
If this advertiser wanted to achieve a target ROAS of 600%, they would need to generate $6 in revenue for every $1 spent on advertising.
Google Ads would then adjust their bids for each auction to achieve this target ROAS.
Formula: ROAS = (Revenue / Cost) x 100%
- Avg. Target ROAS is not suitable for all businesses and advertising goals. For example, there may be better bidding strategies if your focus is on driving brand awareness or finding leads.
- Setting realistic target ROAS based on your business goals, industry, and competition is essential. Setting an unrealistic target may result in missed opportunities or lower ad performance.
- Avg. Target ROAS works best with a high volume of conversions to optimize your bidding strategy effectively. If your conversion volume is low, it may be challenging to achieve your target ROAS.
What is the difference between ROAS and ROI?
ROAS (Return on Ad Spend) measures the revenue generated from advertising relative to the cost.
ROI (Return on Investment) measures the overall return on investment, taking into account all costs and revenue generated, not just from advertising.
Is it possible to achieve a target ROAS of 1000% or more?
Yes, achieving a target ROAS of 1000% or more is possible, but it depends on various factors such as the industry, competition, and the quality of the advertising campaign.
It's best to set a realistic target based on your business goals and regularly track the campaign's performance.
Can I use Avg. Target ROAS for non-ecommerce businesses?
Yes, you can use Avg. Target ROAS for non-ecommerce businesses, but it may not be the most suitable bidding strategy depending on your advertising goals.
If you aim to find leads or increase brand awareness, other bidding strategies like Target CPA (Cost per Acquisition) or Target Impression Share may be more appropriate.
How often should I adjust my target ROAS?
We recommend that you adjust your target ROAS, depending on the performance of your advertising campaigns.
If you consistently achieve your target ROAS, consider increasing it to maximize revenue and profits.
You may need to adjust your bidding strategy or optimize your ad campaigns if you're not meeting your target.
How can I measure the actual revenue generated from my advertising campaigns?
You can measure the revenue generated from your advertising campaigns by setting up conversion tracking in Google Ads.
Conversion tracking lets you track the actions taken by users after clicking on your ads, such as filling in a form or buying a product. You can then use this data to calculate your ROAS and optimize your advertising campaigns.