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Winning Ads: Calculating Return On Ad Spent (ROAS)

Moteefe comes bearing gifts: more tips on Facebook ads, and this time focusing on return on ad spend (ROAS)!

You should stop turning off your winning Facebook adverts! Facebook reporting is a blunt tool and does not show you the full picture. If an ad set is break even and if you are correctly re-targeting, you should definitely leave it running as you will be picking up extra people to re-target to. 

But if you are only using the cost per purchase as displayed in Facebook ads manager to work out your break even point, you may be turning off ad sets that are making you money…

Facebook has a metric called return on ad spend (ROAS). The way this metric is calculated is: purchase conversion value divided by amount spent. Facebook can see the amount that each purchaser is spending – they will then display this information in the ROAS column in Facebook ads manager. You can add this metric in by clicking on the column’s tab on the right hand side of Facebook’s ads manager, and then clicking ‘customize columns’.

Facebook displays ROAS as a number with two decimal places, like this: ‘2.00’. Having a ROAS of 2.00 means that you have spent $100 on advertising and your buyers have bought $200 worth of products from that ad set.

Here is how to calculate your ROAS’ break even point: selling price divided by product price minus base cost:

So for our classic men’s T-shirt selling in the United States at $23.99:                                 

  • The base cost without a Moteefe sellers tiered discount is $5.49                                      
  • 23.99 ÷ (23.99-5.49) =  23.99 ÷ 18.5 = 1.296                                                               
  • So if your ads for a Classic men’s T-shirt have a ROAS above 1.3, you are making money plus all of the people that view the campaign can be re-targeted.

If you are selling a unisex sweatshirt in the United States at $29.99:                                 

  • The base cost without a Moteefe sellers tiered discount is $12.00 
  • 29.99÷(29.99-12.00)=29.99÷17.99= 1.667                                                                       
  • So if your ads for a unisex sweatshirt have a ROAS above 1.67 you are making money – don’t turn these ads off!

European prices will be different as they include VAT, so you should calculate them separately.

You should look back through your advertising history with this new metric, see all of your ads that were making money and you should duplicate them (as turning on old ads tends to give worse performances than duplicating them and running new ones). See if you can make some extra sales!

So what are you waiting for? Launch your new campaign at http://www.moteefe.com and run your advertisements taking into consideration your ROAS, you’ll see much better progress!

Moteefe – Let’s do business together

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