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Google Ads Tips: Biggest ROAS Mistakes: How To Target ROAS

My name is Uzair and in today's YouTube live stream I'm going to be talking about how to calculate your return on ad spend, which is called the ROAS.….. Alright, so ROAS is a very critical and important metric when it comes to running your Google Ads……. So when you spend $1 or £1 or whichever currency you're spending, how much are you getting back? If you are getting more than one, that means potentially your, your campaign is profitable. If you are getting less than one, then you are making a loss. But, it really depends on your funnel and how your customer lifetime value is because you may make a loss at the front end, but the backend is where the profit is...

The first metric we will look at is the ‘average conversion value’... Let's keep it simple, let's say whenever somebody makes a purchase, our average order value is a hundred. Then what we are, what we want our ROAS to be, the desired ROAS. So we've got three columns here, One is for, six X, three X, and one X. So we're going to put in six, three, and one. Now you can change these if you want, that's not a problem and then you can work out your maximum profitable CPC bid. What bid is the maximum bid that you can afford to give to Google or afford to pay Google, to be profitable for your return on Ad spend? 

From your data set, you will also have a conversion rate in your Google Ads account….3% is the average right across the board for branded campaigns. I'm going to keep it a bit high and see what happens, so I'm going to keep it 10%. And now we've got these numbers over here for the maximum CPC bids, which we can afford to pay, pay Google. 

The formula for these is your conversion, average conversion value, which is a hundred, divided by your desired ROAS, which is six, and you times it by 10. So you get a maximum, so the maximum bid you can afford to pay to achieve a six X ROAS is $1.67, for three X it's the same thing, you get 3.33, and for 1 X, it is $10. So this is where you will need to bid so you can achieve these profitable ROAS. Now, if I were to take the same figures, hundred will be the same, but let's say keeping all the conversion values the same, the desired ROAS would be six, three, and one, non-branded will usually be less.

And now our ROAS, profitable CPC goes right down to 50 cents, $1 and $3. So what this is showing you is you can afford to bid really high if you are trying to break even, and as your return on ad spend goes up, you cannot go as high on your bidding as possible. And what that will do is for your campaigns, to be, you may not be very competitive in your bidding, and you may lose out in the auction. So you need to have this fine balance of your maximum profit or your profitable ROAS and a very competitive bid, you can't have both, you'll never have both.

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