What's a Good ROAS for Google Ads? How to Set Performance Goals for Your Campaigns
As a general rule of thumb, a good target ROAS for Google Ads campaigns falls between 200-800%, with most businesses aiming for at least a 300% return on ad spend. However, take into account your profit margins, customer lifetime value, and industry benchmarks when setting realistic expectations. If you’re interested in exploring this topic a little more, read on…
If you're new to Google Ads, one of the most important metrics to understand is return on advertising spend (ROAS). This measures how much revenue you generate for each dollar spent on ads. It's essential for gauging campaign profitability and making more informed decisions when it comes to your budget or overall strategy.
But with averages varying wildly across industries, how do you know what makes a “good” ROAS for your business? This guide examines exactly that. We’ll cover:
Calculating Google Ads ROAS
ROI Expectations Across Industries
Setting ROAS Targets by Business Model
Optimization Tips to Improve ROAS
Let’s explore what performance benchmarks you should set for your Google Ads campaigns. Keep in mind that a lot of this information is based on our experience across multiple markets and industries.
Calculating Return on Ad Spend (ROAS)
In its simplest form, ROAS measures the return you generate per dollar spent on advertising. Here is the formula:
ROAS = (Revenue from conversions - Ad spend) / Ad spend
For example, if you spend $1,000 on Google Ads and earn $5,000 in revenue from those clicks, your ROAS is:
($5,000 revenue - $1,000 ad spend) / $1,000 ad spend = 400%
Aim for an ROAS of at least 200%+ so that your profits sufficiently exceed ad costs. Anything under 100% means you’re losing money.
Average Google Ads ROAS Benchmarks by Industry
Setting realistic expectations requires knowing what’s average for your niche. ROAS benchmarks vary wildly between industries.
Lead Generation - Because leads have high perceived value, strong optimization can drive ROAS upwards of 1,500%.
SaaS & Subscriptions - Typical returns between 300 – 500%, with the highest paid search ROIs often coming from SaaS companies.
eCommerce - Average ROAS falls between 150 – 400% for most online retail brands.
Informational Sites - Can still hit 200%+ returns by promoting high-value content like guides and templates.
Brand Awareness - Softer metrics like reach and engagement take priority here. Track impressions and CTR rather than direct ROAS.
Research both competitors and vertical averages to inform reasonable targets. Being unclear on benchmarks leads to wasted budgets.
Setting ROAS Expectations By Business Model
Your profit margins, customer lifetime value (LTV) and niche also dictate ideal ROAS:
High-Margin Models
Software, services and lead gen boast margins around 75-90%. Monthly contracts amortize LTV over long periods. This gives flexibility for aggressive spending while maintaining profitability. Shoot for an ROAS range between 300 – 800%.
Mainstream eCommerce
Typical retail margins sit between 30-60%. While average order values (AOV) usually limit LTV to 1x costs. Combined with rising CPCs in competitive sectors, target an ROAS between 150 – 450% to sustain ROI efficiency.
Low-Margin, High Volume Models
Domains like electronics and CPG only have 15-40% margins. And one-time value purchases cap LTV. Be lean and optimize for volume within an ROAS range of 200 – 300%. Measure incremental benefits over broader time frames.
Again, clearly Understanding your business model helps adjust expectations.
Tips to Improve Google Ads ROAS
Beyond setting goals, actively optimizing campaigns also lifts ROI efficiency:
1. Audit Ad Groups - Shut down low performing keywords dragging down overall ROAS.
2. Enable Automated Bidding - Leverages conversion data for better traffic allocation decisions.
3. A/B Test Ad Copies - Fine tune messaging to best resonate with audiences.
4. Retarget Engaged Visitors - Remarket high-funnel users who already know your brand.
Continually measure and tweak elements to get more value from ad spend. A lift of even +5-10% ROAS can generate tens of thousands in extra revenue.
Key Takeaways: Good ROAS by Industry
As a recap, here are general ROAS benchmarks to inform your Google Ads performance expectations:
Lead Generation - 1,200%+
SaaS & Subscriptions - 300% - 500%+
eCommerce - 150% - 400%+
Informational - 200%+
Branding - Softer metrics like reach and engagement
Factor in your margins, LTV potential and niche dynamics as well. Continually optimizing towards efficiency improves campaign performance over time.
Hopefully this beginner’s guide gives clarity on setting reasonable ROAS targets for Google Ads. Let your business model and industry benchmarks inform expectations. Then tweak campaigns to improve results.
If you need help improving your Google Ads ROAS, our expert team can audit your account and provide customized optimization recommendations tailored to your business goals.
This article was written with the support of A.I. technology.
