One of the latest social media news that has been trending recently is Snapchat’s announcement of its partnership with data analytics company Fospha. The latter is a provider of digital measurement tools that will enable ecommerce advertisers to gauge the impact and efficiency of their advertising campaigns.
Fospha’s integration with Snap’s instant messaging services will enable Snap app users to monitor the attribution capabilities of their campaigns so they can take immediate actions for improvements. Snap users will also be able to gain accurate insights that will allow them to identify growth opportunities so they can work toward maximizing Returns on Ad Spend or ROAS.
What Exactly is ROAS and Why Is It Important
ROAS or Return on Ad Spend is a metric expressed in ratio that gives instant insights about the ad campaigns rolled out by ecommerce advertisers. The purpose of which is to track the campaigns that are working effectively and those that do not.
The app’s data analytics feature involves comparing the amount of revenue gained from every specific ad campaign against the respective amount incurred as costs for each ad.
Calculating the ROAS Ratio
Let us say an ecommerce advertiser spent $2,000 on a particular digital advertisement that contributed $8,000 in revenue. The ROAS ratio will then be calculated by dividing $8,000 by $2,000. The resulting quotient of $4 represents the revenue gained on every dollar invested for the particular ad campaign.
In our example, the ROAS ratio is 4:1, denoting that for every dollar spent on the sample ad campaign, as much as $4 is realized as revenue.
A high ROAS ratio therefore denotes efficiency while a one-is-to-one ratio or lower indicates the ad campaign is not working as efficiently as hoped for.