What is a good ROAS in Google Ads?

bidding google ads Jun 03, 2024
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By: Jyll Saskin Gales, Google Ads Coach

Are you wondering what a "good" return on ad spend (ROAS) is for your Google Ads campaigns? It's a common question, but the answer isn't always straightforward. While there's no one-size-fits-all answer, let's dive into the factors that influence a good ROAS and how you can determine what's right for your business.

 

The Truth About Ad Metrics

First things first, there are no inherently "good" or "bad" metrics. They are simply indicators of where you are now and where you want to be. The simplest definition of a good ROAS is one that makes your business profitable.

 

Breaking Down ROAS for Your Business

ROAS stands for return on ad spend, calculated as revenue divided by cost. In Google Ads, you'll find this metric in the "Conversion value / Cost" column. A ROAS of 3.6, for example, means you earn $3.60 in revenue for every $1 spent on ads. 

 

If ROAS is your primary concern, you might consider using a Target ROAS bidding strategy. This tells Google to prioritize achieving your desired ROAS rather than focusing solely on cost per click or view. Remember, when setting a Target ROAS, enter it as a percentage (e.g., 360%) while in the "Conversion value / Cost" column, it's displayed as a decimal (e.g., 3.6).

 

The Balancing Act: Reach vs. Efficiency

Setting a higher Target ROAS might seem appealing, but it can limit your campaign's scalability. A high ROAS often means you're only reaching a smaller audience already familiar with your brand. On the other hand, accepting a lower ROAS allows you to reach a wider audience, potentially attracting new customers who may not convert immediately but could become valuable in the long run.

 

When a High ROAS Isn't So Great

It's easy to assume a sky-high ROAS is the ultimate goal, but that's not always the case. Consider the example of a large retailer with a Brand Search campaign boasting a 34x ROAS. While impressive, this ROAS indicated they were only reaching customers already searching for their brand and ready to buy, limiting their potential for growth.

 

So, What IS a Good ROAS?

If you're looking for a starting point, a ROAS of 2-3x is generally considered good and achievable. However, the ideal ROAS for your business depends on various factors, including your profit margins and the lifetime value of a customer.

To determine your optimal ROAS, consider your profitability goals and the long-term value your customers bring. By analyzing these factors, you can set a Target ROAS that drives both profitability and growth.

 

Ready to go inside Google Ads and achieve your desired ROAS? Subscribe to my free Google Ads newsletter, The Insider, for expert tips and strategies.

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