Understanding ROAS in Google Ads: A Simple Guide

Every day, businesses pour millions into digital ads without knowing if they’re getting a worthwhile return. Competitors who actively track and optimize ROAS are scaling faster, acquiring high-value customers, and reinvesting in growth—while others struggle with inefficient spending. The question is: Are you using your ad budget to its full potential or leaving money on the table?

This blog breaks down return on ad spend in a simple yet strategic way. You’ll explore the difference between ROAS and other key metrics, understand how different ad networks impact results, and discover actionable ways to improve your ROAS in Google Ads. By the end, you’ll know how to maximize every dollar you invest in advertising.

Let’s break it down step by step!

What Is ROAS?

Return on Ad Spend (ROAS) is a key metric in digital marketing, particularly for Google Ads. It helps you measure the revenue generated for every dollar spent on advertising, offering insights into your campaign’s effectiveness. ROAS is calculated as:

ROAS = Revenue from Ads ÷ Ad Spend

The higher your ROAS, the more efficient your advertising spend. By tracking return on ad spend, you can optimize your campaigns, improve budget allocation, and maximize your return on investment.

Difference Between ROAS, Revenue, Profit, and ROI

Importance of ROAS

Understanding and optimizing your ROAS is crucial for several reasons:

• Budget Allocation: Identify the most profitable campaigns and distribute your budget accordingly.

• Performance Assessment: ROAS clearly shows which advertising strategies work best.

• Strategic Planning: Use ROAS insights to refine and scale your marketing efforts.

In the gaming industry, ROAS is especially critical. If you're running ads to acquire new players, you need to ensure that the revenue from in-app purchases, in-game ads, or subscriptions outweighs your ad spend. A high ROAS means your campaign is generating sustainable growth.

For example, a mobile game developer might run ads to attract new players. By calculating the ROAS, they can determine if the lifetime value of these players justifies the advertising spend. This analysis is crucial for scaling user acquisition efforts and ensuring sustainable growth in a competitive market.

But what exactly determines whether your return on ad spend is high or low? Let’s break it down.

Must Read: Difference Between ROAS and ROI

Factors Influencing ROAS

Several key factors determine ROAS performance, including customer lifetime value (CLV), industry benchmarks, and profit margins. Optimizing return on ad spend requires strategic ad placements, audience targeting, creative ad concepts, and continuous performance monitoring. Let’s break these down:

1. Customer Lifetime Value

CLV represents the total revenue you can expect from a single customer over the duration of their relationship. A higher CLV justifies increased ad spend, as the long-term revenue from the customer offsets the initial acquisition cost.

• Predictive analytics for spend forecasting: AI-powered platforms like Segwise boost return on ad spend and systematically limit the financial risks by predicting payback periods.

• Optimize monetization strategies: Capitalize dynamic pricing in in-app purchases (IAPs) and offer exclusive deals to high-value players.

Example: In the gaming industry, return on ad spend isn’t just about lifetime value—it’s about how quickly you can break even and scale. Most successful mobile games aim to achieve 1:1 ROAS as early as possible, meaning the revenue generated equals the ad spend. This is tracked through D1, D3, D7, D30 ROAS benchmarks to assess monetization efficiency. In cases of high depth games like strategy 4X games, game studios may even track ROAS over longer periods of time.

• D1 ROAS helps determine immediate revenue recovery after acquisition.

• D3 ROAS shows if users are converting well within the first few days.

• D7/D10 ROAS is where most games strive for ROAS 2-3, ensuring long-term profitability.

By optimizing ad spend towards early ROAS milestones, gaming companies can scale efficiently while maintaining a profitable user acquisition strategy.

2. Industry Benchmarks

Industry benchmarks provide a standard for evaluating return on ad spend performance. Due to differences in competition, customer behavior, and product types, benchmarks vary across industries. Aligning your ROAS goals with industry standards helps you set realistic expectations and strategies.

• Compare ad network performance: Hyper-casual games may perform better with Unity Ads, while mid-core games see higher ROAS on Facebook Ads.

• Understand payback periods: Shorter payback cycles (e.g., under 7 days) allow for faster reinvestment into ad spend.

• Retarget High-Spending Users: Data from Tenjin’s report suggests that retargeting campaigns have a 30% higher ROAS than new user acquisition. Identify high-spending users and re-engage them with exclusive in-game events.

Example: Through targeted programmatic advertising, MPL experienced a 40% increase in ROAS by day 7 and a 30% increase by day 30, significantly boosting their gross merchandise value per user.

Now, let’s understand how you can maximize your ROAS in Google ads.

Further Read: Master ROAS For Mobile Games and Apps

Maximing ROAS In Google Ads

Maximizing return on ad spend in Google Ads involves experimenting with various ad strategies and formats, as well as optimizing bidding using Google's advanced tools.

1. Experiment with ad strategies and formats

To achieve the highest return on ad spend in Google Ads, businesses need to adopt a strategic approach that combines ad format experimentation, data-driven bidding strategies, and continuous optimization.

Diversify Ad Formats

• Video Ads: Use YouTube and in-game video ads to showcase gameplay, which can captivate potential players. 

• Playable Ads: Allow users to experience a snippet of the game before downloading, increasing the likelihood of installation. This interactive format provides a taste of the gaming experience, enticing users to install the game.

• Example: Papaya Gaming combined ironSource's LevelPlay tools with ironSource Aura to scale installs and reach their KPIs. This comprehensive approach led to a 40% increase in ROAS, demonstrating the effectiveness of diversified ad formats and strategic partnerships. 

Implement Audience Segmentation

• Custom Audiences: Create segments based on user behavior, such as in-app purchases or level completions, to tailor ad content effectively. This targeted approach ensures that ads resonate with specific user groups, enhancing engagement.

• Lookalike Audiences: Use data to find new potential players who exhibit behaviors similar to those of your existing user base. This strategy will efficiently expand your reach and help you acquire users who are more likely to engage with your game.

A/B Testing

• Creative Variations: To maximize your ad performance, you need to test different creative elements systematically. Here are the most commonly tested variables in mobile gaming ads:

• Call-to-Action (CTA): Experiment with different CTAs like "Install Now," "Play Free," or "Free Game." The wording, placement, and design can impact conversion rates significantly.

• Creative Format: Test various formats such as User-Generated Content (UGC), gameplay videos, cinematic trailers, or playable ads to see what resonates best with your audience.

• Hook: The first few seconds of your ad are critical. Try different opening sequences—fast-paced action, a problem-solution format, or emotional storytelling—to capture user attention immediately.

• Copy: Play around with different tones and messaging styles. Test whether direct, benefit-driven copy ("Win Big Rewards!") outperforms a curiosity-driven approach ("Can You Beat This Level?").

• Visual Elements: Compare static images versus animated clips, different color schemes, or even character-focused versus environment-focused creatives to understand what drives engagement.

• Audio & Voiceovers: Background music, sound effects, and voiceovers can significantly impact ad performance. Test variations with different pacing, narration styles, or no audio at all.

• Reward-Based Messaging: If your game includes in-app rewards, try highlighting different incentives like "Get 50 Free Coins!" or "Unlock Exclusive Skins!" to see what motivates users to click.

• App Store Optimization: Your app store page acts as the final conversion point before a user decides to install your game. Optimizing its design, content, and structure can significantly impact your install rate and return on ad spend.

2. Optimize Bidding And Use Google Ads Tools

The gaming industry, with its highly competitive user acquisition environment, requires a combination of automated bidding strategies, real-time adjustments, and AI-powered tools to outmaneuver competitors. Below is a detailed breakdown of how gaming companies can implement, optimize, and scale bidding strategies for maximum impact.

Select Appropriate Bidding Strategies

Google Ads offers several bidding strategies, but choosing the right one depends on your goals—whether it’s maximizing installs, increasing in-app purchases, or ensuring a profitable ROAS.

• Target ROAS Bidding: It allows Google’s AI to adjust your bids dynamically in real-time to achieve a specific revenue return for every dollar spent. 

• Example: A mobile RPG game with a subscription model ($9.99/month) can set a Target ROAS of 300%, ensuring that for every $1 spent, at least $3 of revenue is generated. Google's algorithm will prioritize showing ads to users who have a high likelihood of making a purchase rather than just downloading the game.

• Pro Tip: Set different ROAS goals for different audience segments (e.g., casual gamers vs. hardcore spenders). Use Google’s Value-Based Bidding to prioritize high-LTV (Lifetime Value) players.

Maximize Conversions Bidding

This strategy automatically adjusts bids to generate the highest possible number of conversions within a set budget. It's particularly useful when launching a new game and looking to build an initial player base.

• Example: A new battle royale mobile game wants to acquire as many downloads as possible. Instead of setting a rigid cost-per-install (CPI), using maximize conversions allows Google's AI to bid more aggressively for users who are likely to install.

• Pro Tip: Use this strategy for the first 2-4 weeks of a new game launch, then shift to Target ROAS once enough data is collected on high-value users. Also, segment campaigns by device type (mobile, tablet, desktop) to optimize spending based on the best-performing platforms.

Utilize Google Ads Tools for Optimization

Google provides powerful tools to help gaming companies improve campaign performance. Here’s how to maximize them:

• Smart Bidding AI-Powered Optimization: Smart Bidding uses machine learning to optimize conversions or conversion value in every ad auction. It adjusts bids in real time based on multiple signals, including device, location, time of day, user behavior, and past conversion patterns.

• Example: A mobile strategy game uses Smart Bidding with Target CPA (Cost per Acquisition) to ensure new installs stay within a profitable range. Google's AI automatically bids higher for users who have historically installed similar games.

• Pro Tip: Combine Smart Bidding with Seasonality Adjustments: Increase bids during gaming events like Steam Summer Sale or Game Awards Week when user engagement spikes. Also, test multiple bid strategies; Run Target CPA vs. Maximize Conversions in different campaigns and analyze performance trends over a 30-day period.

• Ad Extensions: Ad Extensions provide additional links, callouts, and structured snippets to enhance your ad’s visibility and encourage interaction.

Monitor and Adjust: Continuous Optimization

Real-time tracking and adjustments are crucial for maintaining a high ROAS. Here’s how:

• Data-Driven Adjustments: Regularly reviewing key metrics helps identify which aspects of your campaign need adjustments.

• Key Metrics to Track: Tracking the right metrics ensures you optimize ad spend and maximize ROAS. Cost Per Acquisition (CPA) helps you assess whether you're acquiring players at a sustainable cost. ROAS and Lifetime Value (LTV) provide insights into the long-term revenue generated per user, allowing you to adjust ad spend accordingly. Additionally, monitoring conversion rates by platform (Android and iOS) helps you allocate budgets effectively by identifying which platform delivers the highest-value users.

• Example: A mobile game finds that iOS users have 2x higher in-app purchase rates than Android users. The studio shifts 70% of the ad budget to iOS campaigns to maximize ROAS. Additionally, iOS users contribute to 67% of global app revenue, despite Android having a larger user base.

Use Automated Rules for Efficiency

• Bid Adjustments Based on Time & Audience: Set automated rules to increase bids during peak gaming hours or for high-converting audiences.

• Example: A battle royale game experiences peak engagement from 6 PM to 12 AM. To maximize conversions, an automated rule increases bids by 25% during these hours.

• Pro Tip: Use automated scripts to adjust bids dynamically based on competitor activity. Create device-based rules (e.g., prioritize mobile ads for casual games and PC ads for hardcore titles).

By integrating these bidding strategies, automation tools, and continuous monitoring techniques, gaming companies can maximize their ROAS while ensuring efficient ad spend allocation.

Maximizing ROAS is only half the battle—understanding and capitalizing on the data behind it is what truly drives long-term success.

Interpreting and Using ROAS Data

Interpreting and effectively utilizing return on ad spend data is crucial for aligning marketing efforts with overarching business objectives. To ensure that ROAS aligns with your business goals, consider the following strategies:

• Define Clear Objectives: Establish specific goals for your advertising campaigns, such as increasing brand awareness, driving website traffic, or boosting sales. This clarity will help in setting appropriate ROAS targets.

• Segment Campaigns: Divide your advertising efforts into distinct campaigns based on target audiences. This segmentation allows for more precise tracking and optimization of ROAS for each segment.

• Adjust Budget Allocation: Allocate your advertising budget based on the performance of each campaign. Increase investment in high return on ad spend campaigns and reevaluate or optimize those with lower returns.

Example: A mobile game studio aims to promote a new game. They set a clear objective to acquire 10,000 new users within a month. By creating separate campaigns targeting different demographics and monitoring each ROAS, they can allocate their budget more effectively to achieve their user acquisition goal.

By aligning ROAS with specific business goals and additional metrics, businesses can understand their advertising effectiveness and make informed decisions to optimize their marketing strategies.

Conclusion

ROAS is a crucial metric for your business, particularly in the gaming industry. By understanding its components, optimizing your campaigns, and capitalizing on Google’s AI tools, you can maximize your ad efficiency and scale your revenue effectively.

Segwise puts powerful monitoring tools and creative insights at the forefront while optimizing ROAS enabling you to identify high-value users and allocate ad spend strategically. With powerful monitoring tools and AI-driven creative insights, Segwise enables you to track campaign performance in real-time and refine ad creatives for maximum engagement.

Want to improve your ROAS? Get started with Segwise today!