Struggling to measure your Facebook advertising Return on Ad Spend (ROAS)?
Want to better understand your results?
In this article you’ll discover how to effectively measure your Facebook Return-On-Ad-Spend (ROAS) so you can assess the impact of your Facebook advertising on your business.
What is Return On Ad Spend?
Return on Ad Spend (ROAS) is the online advertising equivalent of Return on Investment (ROI). It’s the cornerstone metric that measures your Facebook advertising success and whether your marketing dollars are producing positive results for your business or just burning a hole in your bank account.
The 2018 social media marketing industry report found that only 10% of respondents strongly agree that they can measure the ROI of their organic social media efforts with 55% citing that measuring ROI is their greatest challenge.
However, measuring the Return on Ad Spend of your Facebook ads is directly linked to your Facebook pixel and conversion tracking. When installed correctly, and depending on your business, you get direct, hard data so you know exactly how well your ads are performing and the overall impact of your Facebook advertising on your business.
Return on Ad Spend is simply the total revenue generated from your Facebook ads (your return) divided by your total ad spend. For example, let’s say you spend £50,000 dollars in a month on Facebook ads and it generates £150,000 in new sales for your business. That’s a 3X ROAS.
There is less ambiguity with Facebook advertising compared with organic social media marketing, which is why it is such a powerful marketing channel. You can track your return on ad spend down to the penny by measuring how much you put in (ad spend) and how much you get out (new revenue).
How you measure your ROAS will depend on your business type
You can bucket the businesses that advertise on Facebook into two main categories.
- Businesses that sell a product or service online that customers pay for immediately on their website.
- Service providers who generate leads and convert potential customers off Facebook via phone or email communication channels.
For those businesses in the first bucket, measuring your ROAS is easier as it will be tracked directly by your Facebook Pixel and the purchase conversion event. On the other hand, for service based businesses, who are generating leads and converting off Facebook, it is harder to measure due to a tracking gap and requires you to track the leads that convert and then manually cross match them with your Facebook data.
In the rest of this article we are going to look at how to measure ROAS for both types of business as well as looking at some of the wider issues with ROAS measurement.
First make sure your Facebook Pixel and conversion tracking is setup correctly
Before you can use measure your ROAS, you need to have the Facebook Pixel set up and installed on your website as well as any relevant conversion events set up.
For example, if you are an eCommerce business and are using Facebook to generate product sales, you’ll need to have the eCommerce event actions set up, which include Add to Cart, Initiate Checkout and Purchase. Whereas, if you are a service business generating leads, you’ll want to have the Lead event action installed.
To install the Facebook Pixel and other relevant conversion events click here for a full step-by-step guide. Once you have installed the Pixel on your website and your events, you want to check that they are firing correctly. There are a number of ways to do this. The easiest is to navigate to your Pixel dashboard via the Ads Manager main menu.
Next, select your Pixel and open the full dashboard. Under the graph view you’ll see the event actions that are firing, along with the status of each event and the number of events received.
If they have been installed correctly in the status column it should say Active and when the event was last received.
On any events that aren’t firing correctly, that have Inactive in the status column, click on the diagnostics option above the graph view to see any issues with your Pixel and event installation.
Ensure the Purchase value is being tracked by your Pixel
For businesses using the Purchase event to track sales, measuring ROAS effectively requires you to be tracking the value of the purchases from Facebook not just the volume of purchases.
To check that the value of orders is being sent via the Pixel to your ad account, click View Details under the Purchase event action. Then in the pop-out window under Parameter, look for the value parameter and number of items parameter, along with content IDs and currency.
Creating a custom column to measure your purchases, purchase value and ROAS
Now with the Pixel and event actions set up, you want to create a custom reporting column that displays key metrics including the number of purchases, the conversion value of those purchases and the return on ad spend.
To do this navigate to your Ads Manager dashboard and with the performance column selected as default, click on customise columns from the drop down list.
The pop-up reporting creation window will then appear. It consists of three columns. On the far left are the metrics categories, in the middle are all of the metrics you can report and on the far right are the specific metrics in your custom reporting column.
First we want to remove the unwanted metrics that are currently in our reporting column. In the far right column remove all metrics so you are left with the 11 core metrics listed below.
Ad Set Name
Last Significant Edit
Cost per Results
Next, we are going to add in the purchases, conversion value and the ROAS metrics. In the categories section, in the left column, under conversions select standard conversions.
In the middle column, you’ll see a row for each of the standard event actions. Scroll down to purchases and select the tick box for Total, Cost and Value. Then, in the Purchase ROAS row select Total.
When you select these metrics, it will add them to your custom reporting column on the far right. Scroll down to the bottom of that column to edit the segments. In the total purchase field, you’ll see a breakdown of these metrics by purchase type, such as website, mobile app and offline, are all selected.
If you are only tracking Purchases from your website and not on a mobile app, offline or through a Facebook store, deselect all of the boxes that are ticked, including website purchases. This may seem counter intuitive but we just want the total purchase value and not the segmented data.
Do the same for the Purchase Conversion Value metric and the Purchase ROAS metric. You should be left with a custom reporting column that includes:
Ad Set Name
Last Significant Edit
Cost per Results
Website Purchases (No segmenting)
Cost per Purchase
Purchase Conversion Value (No segmenting)
Website Purchase ROAS (No segmenting)
Finally, you want to set your reporting window. The default attribution window of 28 day click and 1 day view will already be selected. However, to get a true picture of how your campaigns and ads are performing you want to add the 28 day view window as well.
Select Window Comparison in the bottom right corner of the custom reporting creation window. Then, tick the box next to 28 day under the view column.
IMAGE Attribution Window – SME.jpg
CAPTION Select the 28-day tick box under the view column in the attribution window.
The last thing to do is to click “Save as preset”, give you custom reporting column a name, such as ROAS and click apply.
Analyse your ROAS data to determine your level of return and how specific campaigns are performing
The next step is to analyse the Purchase and ROAS metrics in your new reporting column. You’ll see two columns for each metric, the first showing you the results for the default attribution window, 28-day click and 1-day view. The second showing you the 28-day view results.
With ROAS analysis you first want to get a broader measure of how your overall Facebook advertising is performing and what return you are seeing. To analyse this, set your date range via the date picker in the top right corner. What date range you set will depend on how deep into Facebook advertising you are.
If you are just starting out, then select Lifetime whereas if you are already spending five or six figures per month on Facebook, choose “Last month” to do a monthly ROAS analysis.
Next, look at your totals column and add together your two ROAS figures to get your total ROAS across both data views. Your ROAS will be expressed as a decimal figure such as 3.7. That means that across all of your campaigns in your given time period you generated a 3.7X return on your ad spend.
If you are a bit of a data nerd like me, you can also work it out by adding the totals of your purchase conversion value together to get the total revenue generated. Then, divide that by your ad spend to get your ROAS.
Once you have analysed the overall impact of your Facebook advertising, you can then look at the specific ROAS of your individual campaigns.
Select the first ROAS column to sort your campaigns by highest ROAS. By doing this you can immediately highlight your most effective campaigns, but also your weakest ones.
With the highest generating ROAS campaigns you can look to scale the ad set budgets to generate more purchases. However, it is worth noting that when you scale your ad spend your cost per purchase will increase and your immediate ROAS will decrease as you start to reach more people in your target audience, who aren’t hyper responsive and are not the low hanging fruit that Facebook will have shown your ads to when you started with lower budgets.
For campaigns that aren’t ROAS positive, meaning that your total ROAS is less than 1 you can dive deeper into your ad sets and ads by analysing them using the CRFC metrics.
When you do this you can identify why they are not delivering results and also what changes you need to make to get their performance back on track, such as improving your audience targetingfor example.
Measuring ROAS for lead generation
If your business falls into the second bucket, mentioned earlier, and you are using Facebook to generate leads, then measuring your ROAS isn’t as easy. It starts the same way as the method above, you still need the Pixel installed on your website as well as standard events set up.
Instead of purchase and eCommerce events you want the lead conversion event set up for your contact points on your website, such as your contact form confirmation and any lead magnets you are using to get people on your email list.
Using the same method of building a custom reporting column highlighted earlier, create a reporting column with the lead event action and any custom conversions you created for steps along your lead funnel.
Once you have done that, for each of your leads that have successfully become a new customer or client, trace what marketing channel that new customer came through and how much they are worth to your business.
You can do this by looking at your CRM or email marketing software to see when they were added to your list and then cross reference that with your Facebook advertising at the time by looking at the lead custom reporting column you just created.
The problem with Facebook ROAS measurement
The biggest issue with how you can currently measure your return on ad spend on Facebook is that, using the Purchase ROAS metric, it only reports the immediate purchase value at a specific moment in time, when you assess the data.
However, the key to accurately measuring the real impact of your Facebook advertising and any marketing channel for that matter, is to look at your customer lifetime value, which goes far beyond their first purchase.
I call it True ROAS and it is usually a much higher level of return due to the higher customer lifetime value.
For example, let’s say you spend £10,000 in a month on Facebook ads with an average purchase value of £60 and a cost per purchase of £20. It generates 500 purchases (new customers) with
However, if your customers, on average, spend a further £80 in the next 12 months, the purchase value increases from £60 to £140. When you measure your True ROAS, those 500 new customers were actually worth £70,000 to your business as they each spent £140. Therefore, having spent £10,000 to acquire them your True ROAS is actually 7X.
When it comes to making ad spend decisions and planning your ad campaigns, don’t just look at your immediate ROAS but calculate your True ROAS. To help you better understand the conversions that happen in your business and how they can be attributed to Facebook as a marketing channel, Facebook have introduced the Attribution tool. Click herefor a full guide on how to set up and use the new tool to better understand your data.
Measuring Facebook ROAS isn’t as straightforward as it might appear. But by using the Purchase ROAS method or the Lead method, depending on your business, you can assess the immediate return your Facebook advertising is generating for your business.
By using the Attribution tool alongside these methods and factoring in your customer lifetime value as well, you can fully understand the true long term impact of your Facebook advertising on your business.
What do you think?
Are you measuring your True ROAS when assessing your Facebook ad performance?
Let me know by leaving a quick comment below.
About Charlie Lawrance
Charlie Lawrance is the Founder and CEO of Gecko Squared, a digital marketing agency that specialises in Facebook advertising. His clients include eCommerce companies, software companies and professional service businesses. Stay in touch by liking his Facebook Page (Charlie Lawrance).