Blended ROAS: Understanding the profitability of your advertising campaigns
You've probably heard of ROAS, which in English means "return on ad spend." But what exactly is the «blended ROAS»? The word "blended" refers to a mixture or combination, and in this context, it is a mathematical formula to calculate the profitability of an ad campaign. But don't worry, you don't need to be an algebra expert to understand it. Stay with us to understand what it is all about.
The blended ROAS formula
The blended ROAS helps us calculate the effectiveness of a company's advertising investment. Have we invested too much compared to the return we received? That's a crucial question in today's marketing world, and fortunately, we can answer it simply.
ROAS is calculated by dividing the revenue attributable to a marketing campaign by the cost of those ads. And the blended ROAS incorporates global data, that is, it is calculated by dividing the brand's total revenue by the total investment in ads on all channels that are part of its marketing strategy. It is also known as "Marketing effectiveness ratio» (Marketing Efficiency Ratio) and is not limited only to Google Ads, but covers all advertising campaigns and platforms.
The formula is as follows: (Total profits / Total money invested in Marketing) x 100
Is blended ROAS a step back?
Some might consider blended ROAS to take us back to basics. While we currently have access to detailed data on the performance of individual ads, analyzing and making decisions based on so much data can be exhausting.
Let us remember that brands were already achieving benefits through advertising before the digital era, without having such specific data. Leading marketing agencies in the 80s didn't know the exact revenue generated by each ad, but they did understand the relationship between spend and revenue, and to no one's surprise, the results were positive.
Some experts argue that the time to analyze even the smallest details has passed. Not because we question its effectiveness, but because the metrics obtained directly from the platforms are no longer as reliable as before.
Blended ROAS calculation
Calculating the blended ROAS itself is relatively simple, but to obtain a useful result, it is necessary to correctly define both the numerator and the denominator. That is, establish a clear criterion to determine the total cost of ads and total revenue.
A basic way to calculate the total cost of ads is to consider only the amount of money invested. However, a more rigorous approach would be to include other advertising-related costs. This will make the blended ROAS more realistic. Some of these additional costs may include:
It is important to note that not all income comes exclusively from advertising. To obtain a real return on advertising investment, it is necessary to consider other related income, such as:
In summary, although blended ROAS can be calculated relatively easily, obtaining the actual figures involved in the formula can be more complex. However, once the cost and revenue criteria are defined, this metric will provide valuable results in each period.
At IMMORAL, we can help you optimize your advertising campaigns from scratch, with total transparency and control over expenses and income, so that your results are truly successful. Contact us and let's turn your project into a success story.