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ROAS: What It It? And How To Apply It?

If you are running a Google Ads campaign, then choosing the perfect bidding strategy that aligns with your goals is crucial to your campaign performance assessment.

Target return on ad spend (ROAS) is an automated Google Ads bidding strategy that allows you to get more conversion value or revenue at ROAS you set. Marketers have been using it mostly for e-commerce businesses and shopping campaigns. However, it can be used for all type of businesses.

Target ROAS focuses on quality over quantity by maximizing the value of each conversion, rather than the number of conversions. This is automated bidding strategy allows machine learning to do most of the work for you. When you enter the desired ROAS, it tries to get you as close to that number as possible with the bid you’ve selected.

ROAS can be measured at your Google Ads account level, your campaign level, and your ad group level. In this respect, it is easy to calculate it even if it seems complicated. ROAS is your total conversion value divided by your advertising costs. In other words, your Target ROAS is the average conversion value you’d like to get for each dollar you spend on ads.

For instance: If your ad spend is $40 to sell one piece of a $200 product, your ROAS is 200/40=5 Thus, for each dollar you spend on advertising, you earn $5 back.

How and where to start?

To be able to apply Target ROAS bid strategy, you have to set values for the conversions you’re tracking and have a minimum amount of monthly conversions.

Most campaign types need at least 20 conversions in the past 45 days except Search campaigns, which need at least 15 conversions in the past 30 days. However, to have the best results, you need enough data for well-versed bidding decisions. Thus, based on Google Ads it is recommended to have generally at least 50 conversions in the past 30 days.

If you just started lately reporting conversion value for your campaigns or you just have changed the conversion value, it is recommended to wait 6 weeks to obtain conversion values at a similar rate before applying Target ROAS. On the other hand, if you are running App campaigns, you’ll have to get at least 10 conversions every day or 300 conversions in 30 days.

It is important to note that the Target ROAS you set may influence the conversion volume you receive. Hence, you shouldn’t set a very high target that may limit the amount of traffic your ads may get. Besides, other factors may affect sometimes your results. The latter may be affected by holidays, weekends, special events, competition or even new changes to your product data.

Finally, using an automated bidding strategy such as Target ROAS can help you save time adjusting bids and allow you concentrating on optimizing your campaigns for even better results. It’s also a great method to understand how to allocate your advertising budget.

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