Common ROAS Calculation Mistakes and How to Avoid Them
Berry:Your Marketing Assistant
29 Jan 2025
5 min read
What Is ROAS?
ROAS (Return on Ad Spend) is one of the most crucial metrics in digital marketing, measuring how effectively your advertising spend generates revenue. It answers a simple but vital question: “For every dollar I spend on ads, how much money do I make back?” The formula for ROAS is straightforward: ROAS Formula: Revenue from Ads / Cost of Ads For example, if you spend $100 on an ad campaign and it generates $500 in revenue, your ROAS is 5. This means you earn $5 for every $1 spent. ROAS is a key performance indicator (KPI) because it shows the direct impact of your advertising efforts. However, while the formula is simple, calculating ROAS accurately in practice can be complicated.
Why Is ROAS Important?
Understanding ROAS is essential for several reasons:
Optimizing Your Budget: ROAS helps you identify which campaigns are delivering the best results. By focusing your budget on high-performing ads, you can maximize profitability.
Improving Campaign Performance: With ROAS data, you can test and refine different strategies, such as ad creatives, targeting, and platforms, to achieve better results.
Making Data-Driven Decisions: ROAS provides clear insights into your return on investment (ROI). This allows you to allocate resources effectively and avoid overspending on ineffective campaigns.
Scaling Your Business: When you know which ads are driving sales, you can confidently increase your spend on those campaigns, driving growth without unnecessary risk.
Common Calculation ROAS Mistakes
1. Overlapping Revenue Attribution
One of the biggest challenges in ROAS calculation is overlapping revenue attribution. Here’s how it happens:
Google Ads might report that a user clicked on an ad and made a $200 purchase.
Meta (Facebook) also claims the same $200 revenue because the user interacted with its ad earlier.
Pinterest says it contributed to the $200 purchase because the user saw a promoted pin.
As a result, you may mistakenly think your total revenue is $600, even though only $200 was actually earned. This happens because these platforms don’t communicate or share data with each other. Each platform only tracks the actions taken within its own ecosystem and assumes full credit for the sale.
2. Lack of Proper Pixel Tracking
Without pixel tracking, you miss vital data about the customer journey. Pixels are small pieces of code placed on your website that allow you to track user behavior, such as page visits, clicks, and purchases.
For example:
A user might see an ad on Meta, search for your product on Google, and finally click on a Pinterest ad before buying. Without pixels, you only see isolated actions, not the complete journey.
This leads to inaccurate ROAS calculations, as you won’t know which platforms truly contributed to the sale.
3. Using Single-Touch Attribution Models
Many businesses rely on single-touch attribution, where all the credit for a sale goes to either the first-clicked or last-clicked ad. However, this approach ignores the multiple touchpoints that influence a customer’s decision.
For instance, a user might:
See a brand awareness ad on YouTube.
Click on a retargeting ad on Meta.
Finally purchase after searching for the product on Google.
By giving credit to only one platform, you lose valuable insights into how different channels work together to drive sales.
4. Overestimating Revenue from Ads
Another common mistake is trusting platform-reported revenue without cross-checking it against your store’s sales data. Platforms like Shopify provide accurate revenue figures, while ad platforms might inflate numbers by double-counting or over-attributing sales.
This overestimation leads to decisions like overspending on underperforming ads or misjudging the success of campaigns.
How to Avoid These Mistakes
To avoid these pitfalls and calculate ROAS more accurately, follow these best practices:
1. Implement Multi-Touch Attribution
Instead of relying on single-touch models, adopt multi-touch attribution, which distributes credit across all touchpoints in the customer journey. For example:
40% of the $200 revenue might be attributed to Google for the final click.
30% could go to Meta for retargeting.
30% might go to YouTube for the initial awareness ad.
This approach provides a more balanced view of your campaigns’ performance and helps you optimize your strategy.
2. Use Pixel Tracking Effectively
Install tracking pixels on your website to monitor user behavior across platforms. This allows you to:
Identify which ads and platforms drive conversions.
See the full customer journey, from the first interaction to the final purchase.
Avoid giving full credit to each platform and overestimating revenue.
3. Cross-Check Revenue Data
Always verify platform-reported revenue with your store’s actual sales data. Use tools like Shopify or other e-commerce platforms to ensure your numbers match. This prevents inflated ROAS figures and provides a clearer picture of your business performance.
4. Invest in Attribution Software
Consider using advanced attribution tools like Roasberry which integrates data from multiple platforms to provide a holistic view of your marketing efforts. These tools can:
Track and analyze all touchpoints in one place.
Allocate revenue accurately across platforms.
Help you make data-driven decisions to improve ROAS.
Conclusion
ROAS is a vital metric for measuring advertising success, but calculating it accurately requires careful attention to detail. By avoiding common mistakes like overlapping attribution, poor pixel tracking, and single-touch models, you can get a clearer picture of your campaigns’ performance.
With the right tools, like Roasberry, and strategies in place, you’ll not only improve your ROAS but also make smarter decisions that drive long-term growth.