What is Blended Return on Ad Spend (ROAS)?
Blended ROAS is a holistic metric that captures the performance of your entire marketing ecosystem, including all advertising channels and organic efforts. It blends the return on ad spend from various sources to give you a broader view of your marketing effectiveness.
Traditional ROAS often leads to over-reporting because platforms like Meta, Google Ads, and TikTok each report revenue generated through their own channels. However, these individual reports don’t necessarily account for overlap or the total revenue generated by the business, which is where Blended ROAS comes into play.
For example, if Meta reports $50 in revenue, Google Ads reports $50, and TikTok reports $50, you might think you've generated $150 in total. But in reality, your store might have made only $100. Blended ROAS steps in to reconcile this data and provide you with a true reflection of how much revenue you're actually earning for every marketing dollar spent across all channels.
Why is Blended Return on Ad Spend (ROAS) Important to Marketers?
Blended ROAS gives marketers a clearer, more reliable measure of success by accounting for total ad spend across all platforms. Instead of relying on inflated platform-specific ROAS numbers, Blended ROAS helps you understand the true return on every dollar spent. It also prevents you from over-optimizing for bottom-of-funnel campaigns with high ROAS while ignoring top-of-funnel efforts, which are crucial for long-term growth.
How to Calculate Blended Return on Ad Spend (ROAS)? Formula Included
To calculate Blended ROAS, sum the total revenue and total ad spend across all platforms. Here’s the formula:
Copy Code
SELECT
SUM(attributed_revenue) / SUM(ad_spend) AS blended_roas
FROM
ad_campaigns
WHERE
campaign_date BETWEEN '2023-01-01' AND '2023-12-31';
This query calculates the Blended ROAS for all ad campaigns run in 2023.
Example Calculation
Suppose you spent $100 on Google Ads and $100 on Meta, and your store made $200 in total revenue. The Blended ROAS would be:
Copy Code
SELECT
200.0 / 200.0 AS blended_roas; -- Result: 1.0
This means for every $1 spent across all platforms, you generated $1 in revenue, resulting in a Blended ROAS of 1.0.
Practical Considerations
- Directional Insights:
- Use ROAS for directional insights into which campaigns are performing well. However, always cross-check with actual revenue data from your store.
- Holistic View:
- Blended ROAS offers a more accurate picture of your overall marketing effectiveness by combining data from multiple sources.
- Stage of Funnel:
- Consider the stage of the funnel when evaluating ROAS. Top-of-funnel campaigns may have lower ROAS but are essential for driving long-term growth.
- Complementary Metrics:
- Use complementary metrics such as Customer Acquisition Cost (CAC), Lifetime Value (LTV), and Average Order Value (AOV) to get a comprehensive view of your marketing performance.
Return on Ad Spend (ROAS) Calculator
We’ve created a free online blended ROAS calculator to help you quickly measure how well your marketing campaigns are performing. Use our blended ROAS calculator to simplify your process and stay on top of your advertising efficiency.
Blended Return on Ad Spend (ROAS) Example
Imagine you run an online store selling athletic apparel. You’re running ad campaigns on two platforms: Meta (Facebook and Instagram) and Google Ads.
- You spend $1,000 on Meta ads, and Meta reports $4,000 in revenue directly attributed to those ads.
- You spend $1,500 on Google Ads, and Google reports $6,000 in revenue from Google ad-driven sales.
ROAS (Platform-specific) Calculations:
- Meta ROAS: 4,000 ÷ 1,000=4
This means for every $1 you spend on Meta ads, you earn $4 in return, according to Meta’s platform data.
- Google Ads ROAS: 6,000 ÷ 1,500=4
Similarly, for every $1 you spend on Google Ads, you earn $4 in return, according to Google’s platform data.
The ROAS provided by each platform only considers the revenue generated within that specific platform’s ecosystem. It doesn’t give you the full picture. For example, both platforms might attribute the same sale to their campaigns (due to multi-touch attribution), or the platform’s attribution model might not account for other marketing efforts like email marketing, SEO, or organic social media.
Blended ROAS Calculation:
Now, let’s say during the same period, your total ad spend across Meta and Google Ads was $2,500, but your store’s total revenue (from all sources, including organic traffic, direct visits, and email campaigns) is $9,000.
- Blended ROAS: 9,000 ÷ 2,500 = 3.6
In this case, your Blended ROAS is 3.6, meaning for every $1 spent across all advertising and marketing efforts, your business earned $3.6 in total revenue.
Meta and Google Ads report a ROAS of 4, but they are only showing the return based on their own attributed sales. If you relied only on those numbers, you might mistakenly think your total revenue is $10,000 ($4,000 from Meta and $6,000 from Google), but in reality, your store only made $9,000.
By using Blended ROAS, you get a more accurate and holistic view of how your overall marketing is performing, combining revenue from all marketing channels, including non-paid sources, and cross-platform interactions. This avoids the overestimation that can happen when you look at ROAS on a per-platform basis.
How to Improve Blended Return on Ad Spend (ROAS)
While ROAS and Blended ROAS provide valuable insights, they should not be the sole metrics for optimization. Over-reliance on ROAS can lead to suboptimal decisions, such as focusing only on high-ROAS campaigns (e.g., bottom-of-funnel branded search) and neglecting top-of-funnel campaigns that are crucial for driving traffic and building awareness. Instead, use Blended ROAS as a guiding tool for evaluating overall marketing health while balancing it with other KPIs.
Here are some strategic steps you can take to improve Blended ROAS while keeping your long-term growth in mind:
- Allocate Spend Across the Full Funnel: Resist the temptation to prioritize only high-ROAS, bottom-of-funnel campaigns. While they may deliver immediate returns, they rely on traffic generated by top-of-funnel ads, which often have lower ROAS but are essential for bringing new customers into your ecosystem. Distribute your budget across all funnel stages to ensure long-term growth.
- Refine Audience Targeting: Ensure that your campaigns are targeting the right audience at each stage of the customer journey. Improving how well your ads reach their intended audience can enhance their performance without sacrificing the top-of-funnel initiatives that feed future growth.
- Leverage Organic Channels: One of the benefits of tracking Blended ROAS is that it accounts for both paid and organic efforts. By investing in organic growth strategies like content marketing, SEO, and social media, you can improve overall performance while reducing your reliance on paid media to drive conversions.
- Experiment with Creative and Messaging: Testing new ad creatives and messaging can improve the performance of your campaigns across different platforms. Even slight adjustments to your copy, visuals, or offers can lead to better engagement and conversion rates, positively impacting your Blended ROAS.
- Track Attribution Carefully: Use advanced attribution models to understand how different channels contribute to the customer journey. This can help you identify which marketing touchpoints are driving the most value, allowing you to allocate spend more effectively without falling into the trap of over-optimizing based on ROAS alone.
Benchmarks: What’s a Good Blended ROAS in Ecommerce?
A good Blended ROAS in ecommerce can vary significantly depending on your industry, margin structure, and customer acquisition cost. However, a common benchmark is around 4-5x for high-margin products, meaning you make $4 to $5 for every $1 spent. For lower-margin industries, a Blended ROAS of 1.5-3x is more typical. Understanding your break-even ROAS is also essential—this is the minimum ROAS you need to cover your costs.
ROAS and Blended ROAS are powerful metrics for evaluating the effectiveness of your advertising campaigns. However, they should be used with caution and in conjunction with other metrics to make informed decisions. By understanding the nuances of ROAS and leveraging Blended ROAS, you can optimize your marketing strategies and drive sustained growth for your ecommerce business. If you have any questions or need further assistance with your ecommerce metrics, feel free to reach out or schedule a call with us.
FAQs
Can Blended ROAS be used to optimize campaigns?
Blended ROAS provides a high-level view of marketing effectiveness, but it shouldn’t be used as a sole optimization metric. Relying only on Blended ROAS could lead to cutting out essential top-of-funnel activities that drive long-term growth.
How is Blended ROAS different from traditional ROAS?
Traditional ROAS is platform-specific, whereas Blended ROAS looks at the entire marketing ecosystem, offering a more comprehensive view of your returns.
Blended ROAS is a powerful tool to understand the full impact of your marketing efforts, giving you insights that go beyond individual platforms and helping you make more informed, strategic decisions.
How does Blended ROAS account for organic traffic?
Blended ROAS includes all revenue sources, not just those from paid advertising. This means that if a significant portion of your revenue comes from organic traffic, email marketing, or direct visits, those are factored into the total revenue. It provides a more holistic view of how all marketing efforts, both paid and unpaid, contribute to your business's performance.
What’s the relationship between Blended ROAS and customer acquisition cost (CAC)?
Blended ROAS is closely tied to CAC. When your Blended ROAS is high, it indicates that you are acquiring customers more efficiently across all marketing channels. However, a low Blended ROAS could mean you're spending more on advertising than you are generating in revenue, increasing your CAC. To maintain healthy growth, both metrics should be monitored in conjunction.
