Measuring Return on Ad Spend (ROAS) for Google Ads can be a challenging endeavor, particularly across various industries, as it necessitates businesses to disclose their ad spending and earnings.While average ROAS figures by industry for Google Ads may be elusive, you can reference data from Google Ads, such as ad spend and ROI, to establish a benchmark for your organization.Tip: Aim for a benchmark of 200% ROAS, which represents a 2:1 ratio, or an average return of $2 for every $1 invested. For further insights into the data underlying this Google Ads ROAS benchmark, continue reading. Additionally, you’ll discover how to compute ROAS and what to consider when evaluating your company’s Google Ads ROAS.Understanding the calculation process is crucial, regardless of whether you use a calculator or pen and paper to determine ROAS.It is essential to comprehend what ROAS signifies and whether you’ve achieved a positive or negative ROAS. The ROAS formula is:
ROAS = Total Ad Revenue / Total Ad Spend
Alternatively, the ROAS formula can be expressed as:
ROAS = (Total Ad Revenue / Total Ad Spend) * 100
This variation converts ROAS into a percentage by multiplying the result by 100. Be aware that a positive percentage, such as 50%, does not equate to a positive ROAS, as it only indicates a 50% return on investment. To achieve a positive ROAS, the figure must exceed 100%.The average ROAS for Google Ads is 200%, corresponding to a $2 return for every $1 spent. You can also calculate this figure by examining publicly available Google Ads data, including:
The average ad spend by companies on Google Ads
The average revenue earned from Google Ads
For instance, an average business may invest $9,000 to $10,000 per month in Google Ads and earn $2 in revenue for every $1 spent. On the Google Search Network, this figure rises to $8 for every $1 spent. This data provides the “Total Ad Spend” for the ROAS formula ($9,000 to $10,000) and the “Total Ad Revenue” ($2 for every $1 spent). If an average business earns $2 for every $1 spent and invests $9,000 to $10,000 monthly, they generate approximately $18,000 to $20,000 in revenue from Google Ads each month. You can calculate this value by multiplying $9,000 and $10,000 by $2. With this information, you can input the data into the ROAS formula:
ROAS = Total Ad Revenue / Total Ad Spend * 100
ROAS = $18,000 / $9,000 * 100
ROAS = 2 * 100
ROAS = 200%
This indicates that you are earning $2 back for every $1 invested in Google Ads.Calculating the average ROAS by industry for Google Ads is difficult due to several factors, including the reluctance of companies to disclose their ad spend or ad revenue. Accurate ROAS industry benchmarks require a substantial and diverse sample size, involving a significant number of businesses of varying sizes sharing their ad spend and ad revenue.Without a large and diverse enough sample size, published benchmarks can be inaccurate, potentially leading businesses to misjudge their Google Ads performance and make decisions that could negatively impact their marketing efforts, leads, and sales. Therefore, it’s best to reference the overall ROAS average for Google Ads: 200%.Reaching the average ROAS for Google Ads is commendable, but surpassing it is even more beneficial.Improving your ROAS can lead to increased earnings from paid advertising, resulting in potential celebrations. A higher ROAS can also expand your Google Ads budget, offering more opportunities to achieve results for your company. What constitutes a good ROAS for Google Ads?Anything above 400%—or a 4:1 return. Companies may even aim for higher figures. Notably, Google has found that companies can achieve an average return of $8 for every $1 spent on the Google Search Network.Since most businesses begin with the Google Search Network, which delivers ads on platforms like Google search results, setting ambitious ROAS goals is sensible.While ROAS calculators simplify the process, consider several factors, such as:1. ROAS encompasses all advertising costsWhen calculating ROAS, include your total ad spend. Many companies focus solely on their direct ad spend with an ad network like Google Ads, overlooking additional advertising costs.These additional costs may include:
Bid management tools
Landing page design services
Employee salaries
Including these costs is at your discretion. For instance, you may exclude employee salaries and include certain bid management software, which may be appropriate given your role.2. ROAS focuses solely on advertising-generated revenueROAS only considers revenue generated through advertising, like Google Ads. This approach is suitable for e-commerce companies but may not accurately reflect ROAS for lead-based businesses. Setting conversion actions in Google Ads can be beneficial in such cases.With conversion actions, you can define custom conversions and assign monetary values, such as $250 for a quote request. This tool can help monitor and measure the performance of your ad campaigns and ensure more accurate ROAS calculations.3. ROAS is distinct from ROIWhile similar, ROAS and ROI have distinct meanings:
ROAS measures your average return from advertising.
ROI measures your total return from advertising.
ROAS provides a closer look at your advertising performance, enabling you to focus on the campaigns, ad groups, and ads that yield the best returns for your business. To assess the performance of your advertising efforts on Google Ads, use ROAS.Understanding the average ROAS for Google Ads is the first step. Calculate your Google Ads ROAS using our free ROAS calculator to take the next step. Simply enter your total ad spend and ad revenue for a specified period, and our calculator will handle the rest. Try it now!Should you be dissatisfied with your results or your overall Google Ads strategy, don’t hesitate to reach out to our team. You can contact us online or call us at 888-601-5359 to learn how our Google Ads agency can assist with your pay-per-click (PPC) strategy!
