How To Reap Good ROAS From Your User Acquisition Campaigns

Every user acquisition effort is an investment, and as such, they should be carried out with profitable dividends in mind.

For mobile marketers, tracking mobile user acquisition (UA) campaigns is a vital performance indicator. In years past, mobile app marketers were taking the uncomplicated route and simply looking at their CPI — but unfortunately, this provides a limited look into performance as it offers no real data in terms of revenue generated by installs.

But as the industry matures and mobile app marketers grow more astute, there is one important metric that takes center stage for mobile marketers and that is Return On Ad Spend (ROAS).

For this reason, we prepare this purposeful post to help you make data-driven decisions in all your marketing endeavors.

Let’s kickoff by defining the subject at hand: ROAS.

What Is ROAS And How To Calculate It?

ROAS is one of the most helpful metrics in marketing that provides an outlook of the amount of dollars in revenue you will obtain from investing on specific advertising efforts. The ROAS metric provides an answer to the following question: “If I invest X amount of money in a specific marketing channel, how much profit will I obtain?”

Similar to Return On Investment (ROI), both metrics help measure how well are marketing efforts performing. ROI is a business-oriented metric that determines how ads contribute to the overall success of a company by focusing on all digital marketing efforts and the overall user acquisition spend. ROAS is ad-oriented and focuses on specific user acquisition campaigns by measuring the revenue that’s earned from each dollar that was allotted to ads.

To calculate ROAS you need to measure ad conversions and sales. With this information, you can use the ROAS formula to determine what the return on ad spend is:

Total campaign revenue / Total campaign cost = ROAS

ROAS is revenue-based and measures the performance of UA campaigns in percentage or ratio to give mobile marketers insight of where to invest ad budget more heavily and how to improve other efforts in the future.

What Is Considered A Good ROAS?

There is no magic shortcut or definitive answer as to what actually constitutes good ROAS as numbers are subjective to each company’s unique circumstances. While some businesses thrive on a 3:1 sustained ratio, others require at least 10:1 ratio to stay profitable.

ROAS was at the top in the list of priorities for mobile user acquisition campaigns in 2019 and will be there in 2020, as it’s the key metric behind the scaling up of mobile ad campaigns. Good ROAS takes into account a company’s business goals, pre-download metrics (also referred to as creative metrics) such as the clickthrough rate and install rate, and post-install metrics such as cost per install and retention.

With that being said, a generally accepted ROAS that’s considered sustainable is a 3:1 ROAS; put simply, your sales should be 3x your ad spend. This is considered the spot where marketers aren’t losing money, so anything less than this is a cause for concern and reevaluation to improve the return on ad spend. In fact, the most common ROAS benchmark, industry-wide, is a 4:1 ratio, which means that you should be making $4 in revenue for every $1 in ad spend.

If you’re successfully running on anything higher than 4:1, congratulations are in order since you’re most likely making a pretty decent profit and your mobile ad campaign is exceeding expectations.

But as we mentioned before, this number is not applicable to all companies as circumstances are different for everyone and there is no fix-all solution that applies to every business or industry.

How To Reap Good ROAS From Your User Acquisition Campaigns?

The indispensable key to reaping good ROAS out of your UA campaigns is to reduce your ad spend by either optimizing your ads. But, is it enough to increase your revenue? In the modern reality of mobile advertising, it’s simply not enough to reduce ad costs or to optimize ad campaigns.

A very significant role in obtaining a good ROAS is played by the quality of acquired users. While simple on paper, this can pose a monumental challenge for mobile marketers who are constantly dealing with changing circumstances in the industry and the overall performance of their apps in the market.

Here, we list a few ways to optimize your mobile ads and nurture a healthy ROAS:

• Strategize for different devices. If you adjust your bids and strategies to be based on devices, you can improve ROAS. You can adjust numbers based on mobile devices or tablets to focus on areas that yield more positive ROAS numbers.
• Negative keywords. You can decrease negative mobile ad spend (which leads to a healthier ROAS) by adding negative keywords; negative keywords are keywords or phrases that you don’t want your ad to show up for users who search for these keywords. Thus, you improve the relevance of the traffic you drive to your app.
• Acquire only quality, real users. Always check your traffic for mobile ad fraud, since fraud is now in almost any source, including trusted and conditionally trusted. Fraudulent installs negatively affect not only the ROAS but the ROI as a whole, as the ad fraud has a lot of hidden costs.
• Think about your audience. To maximize performance of UA campaigns, it’s important to keep customers at the forefront of the strategy. Where does your plan take users after they install an app? It’s questions like this that help you craft an app that is relevant to the target user and that employs a unified message in terms of brand voice and tone to capture the audience’s attention.

Ultimately, good ROAS is influenced by profit margins, operating expenses, and the overall state of the business and it’s an ongoing effort to make sure ROAS numbers remain healthy for UA campaigns.

To Conclude

Time and again, ROAS has proven its worth to mobile marketers, yielding insightful information about a user acquisition campaign’s standing. Is your mobile app driving new revenue? With a good tracking of your mobile marketing efforts and the sales they generate, you already have all the tools you need to calculate ROAS and begin making data-driven decisions.

ROAS is a powerful metric but it can lead to misleading results if used as the sole barometer for a mobile app’s success. While your mobile app can have a high ROAS ratio, you could still be losing money in user acquisition campaigns if you are the subject of fraudulent activity.

If you want to know more, drop us a line and we’ll be happy to provide more details; or simply visit our website for more information on mobile app fraud protection.