Ever wondered how to truly measure the success of your mobile app ad campaigns? Enter ROAS, or Return on Ad Spend. This powerhouse metric is changing the game for app marketers. ROAS helps you understand just how much bang you're getting for your advertising buck, making it a must-know concept in today's mobile app marketing landscape.
In this blog, we'll break down everything you need to know about ROAS for mobile app marketing. You'll learn what ROAS means, how to calculate it, and why it's crucial for your app marketing strategy. We'll also explore the factors that affect ROAS and share some handy tips to boost your numbers. Whether you're new to app marketing or a seasoned pro, this blog will give you the tools to master ROAS and take your campaigns to the next level.
Understanding ROAS for Mobile Apps: Definition and Importance
ROAS, or Return on Ad Spend, is more than just another marketing acronym in the mobile world. It's a crucial metric that can make or break your app advertising efforts, especially for mobile games and e-commerce apps. But what exactly is ROAS in the mobile context, and why should you care about it?
What is ROAS for Mobile Apps and Games?
It's a metric that measures how much revenue your ads generate compared to how much you spend on them. In simple terms, ROAS tells you how many dollars you're making for every dollar you spend on app advertising.
The formula for calculating ROAS for mobile apps is straightforward:
ROAS = Revenue attributable to ads / Cost of ads (ad spend)
You can express ROAS as a ratio, percentage, or number. For example, if you spend $1,000 on app install ads and generate $3,000 in in-app purchases, your ROAS would be 3:1, 300%, or simply 3.
5 Reasons why ROAS matters for mobile app businesses
Here's 5 reasons why it's so important:
Measuring ad effectiveness for mobile games and apps: ROAS helps you understand if you're making or losing money on your ads. It's the key metric for gauging how well your campaigns are driving revenue for your app.
Optimizing ad spend across platforms: By tracking ROAS across different channels like Google, Meta and others, you can identify which platforms, which campaigns, Ad groups and creatives are performing best for your app and allocate your budget wisely.
Shaping mobile marketing strategy: ROAS insights, combined with other app metrics like retention, engagement, lifetime value, etc, can guide your future budgets, user acquisition strategies, and overall marketing efforts.
Quantifying performance: ROAS is crucial for evaluating how ad campaigns contribute to your app's bottom line, whether through in-app purchases, subscriptions, or other monetization methods.
Scaling your business: As you grow and run multiple campaigns across various mobile ad networks, ROAS becomes essential for determining which efforts deserve continued investment to drive app growth.
ROAS vs other mobile app marketing metrics
While ROAS is incredibly useful for acquisitionf of users on mobile apps, it's important to understand how it relates to other app metrics:
ROAS vs ROI for apps: Return on Investment (ROI) takes into account all costs associated with an app campaign, including development and operational expenses. ROAS focuses solely on ad spend. ROI gives you a picture of your total app return, while ROAS specifically measures your ad spend return.
ROAS vs App Store Conversion Rate: While app store conversion rate can give you insight into your app page's effectiveness at driving installs, it doesn't provide information about post-install revenue or profitability.
ROAS vs Cost Per Install (CPI): CPI tells you how much it costs to get users to install your app, but it doesn't give you insight into the revenue generated after the install.
Remember, a common ROAS benchmark for mobile apps is a 3:1 ratio - $3 in revenue for every $1 spent on ads. However, what constitutes a "good" ROAS can vary depending on your app category, monetization model, and business goals. For mobile games, a higher ROAS might be necessary due to intense competition, while utility apps might aim for a lower but steady ROAS.
By tracking and optimizing ROAS, you're arming yourself with a powerful tool to make data-driven decisions and maximize the impact of your paid advertising efforts.
Calculating ROAS for Mobile Apps: Formula and Examples
Now that you understand what ROAS means for mobile apps and why it's crucial, let's dive into how to calculate it. The ROAS formula is straightforward, making it easy for you to measure the effectiveness of your app ad campaigns.
The ROAS formula for mobile apps explained
The basic ROAS formula for mobile apps is:
ROAS = Revenue from Ads / Cost of Ads
This simple calculation shows you how much app revenue you're generating for every dollar spent on mobile advertising. If you spend $100 on app ads and generate $300 in app revenue, your ROAS would be $300 / $100 = $3 or a 3:1 ratio.
You can express ROAS for mobile apps in different ways:
As a ratio (3:1)
As a percentage (300%)
As a dollar amount ($3)
All these expressions mean the same thing: for every dollar you invest in mobile app advertising, you're getting $3 back in app revenue.
3 Real-world ROAS calculation examples
Let's explore a few scenarios to help you understand how ROAS works in different mobile app contexts:
Mobile games example: You spend $20 in ad spend to acquire a user who makes $100 worth of in-app purchases. Your ROAS would be $100 / $20 = 5. This means for each dollar you spend on advertising, you earn $5 back in game revenue.
Subscription-based app: In scenarios where recurring revenue is the goal, a 3x ROAS over the first month might be considered a good baseline. Some apps aim for a 5x-7x average ROAS, depending on the subscription model and user lifetime value.
Freemium app example: For apps that can't directly attribute transaction values to ad spend (like most F2P games), you'll need to consider post-install metrics. Take into account factors like user retention rate, average revenue per user (ARPU), and lifetime value (LTV) to calculate a more accurate ROAS.
While a higher ROAS is generally better for mobile games and apps, what's considered "good" can vary by app category and business model. Many marketers aim for a 4:1 ratio, but your specific goals and profit margins will determine what's successful for your app [8][2].
Remember, while ROAS is a powerful metric, but it's just one piece of the puzzle. To get a complete picture of your marketing performance, consider using ROAS alongside other metrics like retention rate and lifetime value.
Factors Affecting ROAS for Mobile Games and Apps: Key Considerations
Let's break down these key considerations to help you get a clearer picture of what influences your Return on Ad Spends.
Ad spend components
When calculating ROAS, don't just consider the amount you're paying to ad networks like Google Ads or Facebook. To get a more accurate ROAS, include all your app advertising costs [10]. This means factoring in expenses such as:
App store optimization (ASO) tools
Creative production for the ads
Attribution platforms
Employee salaries (related to ad management)
It's up to you to decide which costs to include. For instance, you might choose to exclude employee salaries if your role involves more than just app user acquisition, but include the cost of ASO tools used solely for your app campaigns [10].
Revenue attribution for games and apps
ROAS only considers the revenue generated directly from advertising [10]. This works well for many apps, but it can be trickier for apps with complex user journeys. To get a more accurate picture, you can use mobile measurement partners (MMPs) or in-app event tracking. These tools allow you to set custom conversions (like a subscription or in-app purchase) and assign them a monetary value.
It's important to note that ROAS doesn't account for the entire user journey in mobile apps. Users often interact with multiple touchpoints (ads, app store page, onboarding) before making a purchase. This complexity isn't captured in a simple ROAS calculation [11].
Furthermore, ROAS offers a snapshot of the app performance during a specific timeframe. It doesn't account for long-term effects or delayed conversions in the app ecosystem. For example a mobile game user might click an app install ad today but make an in-app purchase next month, which wouldn't be reflected in the immediate ROAS calculation [11].
Industry benchmarks for mobile apps
While it's tempting to compare your app's ROAS to industry averages, approach these benchmarks cautiously. Calculating average ROAS for mobile apps is challenging because:
Most developers aren't comfortable sharing their ad spend or revenue data.
Accurate benchmarks require a large and diverse sample of mobile apps.
Inaccurate data can lead businesses to make harmful decisions [10].
That said, some general benchmarks can provide context for mobile apps. The overall ROAS average for mobile app install campaigns varies widely. Here are some 2022 ad spend benchmarks by app category:
Games: 3.5
E-commerce: 3.2
Fintech: 2.8
Health and fitness: 2.5
Education: 2.3 [12]
Remember, these are just averages. Your ideal ROAS will depend on factors like your app's monetization model, user acquisition goals, and category [12]. Many marketers consider a 4:1 ratio (or 400%) a very good ROAS, meaning you earn $4 for every $1 spent on app user acquisition [12].
By understanding these factors, you'll be better equipped to interpret your mobile app's ROAS and make informed decisions about your app marketing strategies. While ROAS is a valuable metric for mobile apps, it's just one piece of the puzzle in evaluating your overall app performance.
Strategies to Improve ROAS for Mobile Apps
Optimizing app install campaigns
To boost your ROAS, start by fine-tuning your install campaigns. One effective strategy is to leverage negative keywords in your app store ads. By identifying and excluding keywords that generate installs but rarely lead to in-app conversions, you can reduce unnecessary ad spend [13]. This approach helps you focus your budget on keywords more likely to drive valuable users to your app.
A smart move for some apps is bidding on your own app name. This might seem odd, but it can really boost your ROAS [13]. It helps you catch users who are actively looking for your app and stops competitors from stealing your potential users.
Make sure your app store page matches your ads. If you're promoting a special feature or deal in your app, your app store page should highlight that too. This consistency makes users more likely to download and use your app [13].
Personalizing user experience in mobile games and apps
Personalization is crucial for ROAS. In fact, 80% of app users are more likely to engage with an app that offers a personalized experience [14]. Consider using a mobile analytics platform that allows for dynamic user segmentation based on real-time in-app behavior.
Cross-channel personalization is key. By delivering a consistent, personalized experience across all touchpoints - push notifications, in-app messages, email, and more - you can significantly boost your app's ROAS [14].
Remember, your users want to feel special. Use in-app behavior data to understand what features they use, when they use the app, and why they might leave. Use this info to provide relevant recommendations and personalized content [14].
Using data analytics for mobile app growth
Data-driven decisions are vital for optimizing mobile app ROAS. Start by comparing your app's ROAS to similar ones in your category [15]. Then, link your ROAS to other key metrics like retention rate and lifetime value to see its broader impact.
Use attribution models to see how different marketing channels contribute to your overall ROAS [15]. Break down your ROAS data by user segments to identify your most valuable app users.
Set up real-time monitoring for your key metrics [15]. This allows you to quickly spot trends and make timely adjustments to your app marketing campaigns.
Lastly, use predictive models based on historical app data to forecast future ROAS performance [15]. This can help you make smarter decisions about your app marketing spend and strategy.
By applying these tactics, you'll be on track to boost your ROAS and extract more value from your marketing efforts. Remember, the key is to continuously test, learn, and refine based on the data you collect.
Conclusion
Mastering ROAS is a game-changer for mobile app businesses aiming to enhance their advertising effectiveness. By grasping how to calculate and interpret this metric, companies can make smarter decisions about their marketing spend and improve their overall strategy. ROAS significantly impacts budget allocation, campaign optimization, and ultimately, the app's bottom line. It's a powerful tool to measure success and drive growth in the dynamic world of mobile app advertising.
To maximize ROAS, it's crucial to consider the various factors that influence it and implement strategies to enhance its value. This means fine-tuning install campaigns, personalizing user experiences within the app, and leveraging mobile analytics to make informed decisions. By consistently monitoring and optimizing ROAS, app businesses can stay ahead of the curve and make their advertising dollars work harder. In the end, mastering ROAS for apps and games is not just about numbers – it's about creating more effective, efficient, and profitable app marketing campaigns that drive real results.
FAQs
- How is ROAS calculated for mobile apps and games?
Calculating ROAS for mobile apps involves dividing the total revenue generated by an app marketing campaign by the total cost of that campaign. For example, if you spend $1000 on app install ads and earn $2000 in in-app purchases from those new users, the ROAS would be calculated as $2000 divided by $1000, resulting in a ROAS of 2:1, or 200%. - What strategies can be employed to enhance ROAS for mobile apps?
To enhance your Return on Ad Spend (ROAS) for mobile apps, focus on optimizing your app marketing expenditures by improving targeting, eliminating inefficiencies, and bettering the overall app user experience. Start by analyzing data from your app install campaigns to identify high-performing keywords, target audiences, and ad placements, then reallocate your budget accordingly to maximize efficiency. - What is considered an effective ROAS for mobile apps?
An effective ROAS varies by app category, but for mobile apps, a good ROAS is often considered to be around 20-30%. This means that for every dollar spent on app marketing, a return of $0.20-$0.30 is typical. However, some successful apps achieve ROAS of 50% or higher. - How can one forecast ROAS for mobile apps?
To forecast ROAS for mobile apps, calculate the expected revenue from an app marketing campaign (including in-app purchases, subscriptions, and ad revenue) and divide it by the projected ad spend. This calculation gives you a ratio or percentage indicating the effectiveness of the campaign. A higher ratio or percentage suggests a more successful app advertising effort.
References
[1] - Adjust: ROAS for Mobile Apps [2] - WordStream: Maximizing ROAS in Mobile Marketing [3] - Analyzify: Mobile App ROAS Guide [4] - Portent: Understanding ROAS for App Campaigns [5] - BigCommerce: Mobile App ROAS Explained [6] - Digivizer: ROAS Impact on Mobile App Business [7] - FirstPageSage: Mobile App ROAS Statistics [8] - HawkSEM: Benchmarking ROAS for Mobile Apps [9] - Invoca: Calculating ROAS for App Campaigns [10] - WebFX: Average ROAS by Mobile App Category [11] - Thrive Agency: ROAS Importance in Mobile App Marketing [12] - GrowthLoop: ROAS Strategies for Mobile Apps [13] - AdRoll: Optimizing ROAS for App Install Campaigns [14] - Lytics: Personalization Impact on Mobile App ROAS [15] - Varos: Data-Driven ROAS Improvements for Mobile Apps
