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Davor Štefanović on January 31, 2023 (last modified on March 28, 2023) • 21 minute read
Facebook Ads can be an excellent revenue source for pretty much all businesses. However, using them can be a bit tricky for people unfamiliar with the platform. Facebook Ad manager can be somewhat tricky to use, and there’s a lot of information that users won’t be aware of unless they go digging elsewhere.
This is where we run into the biggest problem. Understanding the platform and understanding how Facebook ROAS (return on ad spend) works can make the difference between succeeding and crashing and burning.
Sure, investing some cash into Facebook ads will yield some results… sooner or later.
But those results might not be enough, and it’s always worth it to spend some time learning how to be more efficient and how to maximize performance.
So how do you actually optimize your ad spend?
In this post, we’ll cover everything you need to know about Facebook ROAS. You’ll learn how to calculate it, what you can expect, and what are the best practices for getting the most out of your Facebook ads campaigns.
Let’s dig in:
Return on ad spend is a measure of the effectiveness of an advertising campaign. It’s a useful metric because it allows you to see how much revenue your advertising is generating compared to its cost. With that information, you can determine the profitability of your campaigns and make informed decisions on how to allocate your advertising budgets.
The procedure for calculating ROAS for Facebook isn’t really complicated. You just need to know your Facebook ad spend and Facebook ad revenue.
Then, divide the ad revenue with ad spend, and you have Facebook return on ad spend.
Facebook ROAS = ad revenue/ad spend
For instance, let’s say you’ve spent $20,000 and made $100,000 in new sales. Your ROAS, in this case, will be 5x.
This means that you’ve made $5 for every $1 spent.
ROAS goal is Facebook’s bid strategy option that tells you how to bid in the ad auction. When you set your ROAS goal, Facebook’s algorithm will try to deliver against that over the campaign’s lifetime. It will use dynamic bidding in order to maximize results.
Entering a ROAS goal tells Facebook to aim to get the most purchase value and attempt to keep ROAS around the amount you entered.
It’s difficult to set goals if you don’t know what to expect. The best way to gauge your expectations is to take a look at what the rest of your industry is doing and set your goals accordingly. Since it’s highly unlikely you’ll be an immediate outlier from the get-go, it’s important to moderate your expectations here.
Some products have higher potential profit margins, and just because you set your expected ROAS goal to 500 doesn’t mean you’ll be able to achieve it if 1.1 is the most commonly expected value. Overall, the amount over 100% you can get heavily depends on your business, your product/service, and its purchase value.
Fortunately, you can use Databox Benchmarks to see exactly how companies similar (in size, revenue, industry, etc.) to yours are doing and set your goals with that in mind.
If you ever asked yourself:
Databox Benchmark Groups can finally help you answer these questions and discover how your company measures up against similar companies based on your KPIs.
When you join Benchmark Groups, you will:
The best part?
When it comes to showing you how your performance compares to others, here is what it might look like for the metric Average Session Duration:
And here is an example of an open group you could join:
And this is just a fraction of what you’ll get. With Databox Benchmarks, you will need only one spot to see how all of your teams stack up — marketing, sales, customer service, product development, finance, and more.
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A good way to set Facebook ROAS goals is to rely on your average ROAS for similar conversion campaigns and raise or lower the amount based on performance. You can add a ROAS column to Ads Manager reports on previous campaigns to find historical ROAS data.
Additionally, you can integrate Facebook with Databox in order to be able to pull all the data you need in a simple, easy-to-use dashboard.
This is a good way to grow your brand awareness and increase customer engagement. It’s the equivalent of getting a 100% return on ad spend, where spending $100 will net you $100 back in purchase value. The advertising campaign will cover its own costs, and it won’t be a drain on your business’ finances.
Additionally, it’s a good way to test the effectiveness of your advertising efforts without losing any money. From there, you can work on optimizing future campaigns in order to generate a positive ROI and increase ROAS.
Related: 8 Ways to Choose the Right Facebook Ad Objectives for Your Agency or SME
It’s basic math — if you want to make a profit, you need to get back more than you invest.
For example, setting a Facebook ROAS goal to 1.2 means you’ll earn back 120% of the money you’ve spent on the ad campaign. For every $100 spent, you’ll make $120, netting you $20 in profit.
Related: Cost Cap vs. Bid Cap: Which One Will Supercharge Your Facebook Ad Campaign?
A good ROAS for Facebook ads depends on a variety of factors, including your marketing goal, industry, and other specifics of your business.
While there’s no one-right-ROAS to rule them all, it’s still worth examining how everyone else is doing it and drawing conclusions from there. This is especially significant if we take into account that 60% of agencies set goals around ROAS, according to our recent Facebook ads research.
To gain additional insights into what is a good ROAs for FB ads, we surveyed 35 respondents. For the largest percentage of our respondents (almost 30%), the average return on ad spend is 6–10x. This is closely followed by over 20% who say it’s 4–5x and under 20% with ROAS lower than 3x. Only about 5% reported that their average ROAS for Facebook ads is greater than 80x.
While these numbers seem daunting, the data from our Facebook Ads Benchmark Groups paints a significantly different picture.
When it comes to B2B companies, the median ROAS value (a much more accurate representation of the “typical” value in the dataset) is 1.79 out of a sample of 675 contributors.
P.S. You can join our benchmark group for free if you are a B2B company that runs FB ads.
This doesn’t differ much from B2C companies. According to the data from this B2C benchmark group (free to join), the median value for ROAS is 1.8 according to the data from 636 companies.
The only group with ROAS that breaks the 2.0 ceiling is eCommerce. The median ROAS value for the sample of 192 contributors in our Ecommerce Facebook Ads Performance Benchmarks group is 2.25.
Viewing benchmark data can be enlightening, but seeing where your company’s efforts rank against those benchmarks can be game-changing.
Browse Databox’s open Benchmark Groups and join ones relevant to your business to get free and instant performance benchmarks.
You can definitely use Facebook Ads Manager, but it’s not the most user-friendly of platforms, with somewhat confusing navigation and redundant menu options.
A much simpler way to go about it is to connect Facebook Ads Account with Databox and use it to generate clear and simple-to-use dashboards.
To connect a Facebook Ads Account with Databox, first, you have to go to Data Manager and click +New connection in the upper right corner. Then, type Facebook Ads in the search bar and click the green Connect button that appears when you hover over the Facebook Ads icon.
After that, you’ll see the Activation window. This is where you’ll get a prompt to enter your login credentials for Facebook Ads and authorize the Databox app.
After you’ve done this, you can create a databoard to track your ROAS or pick one of the existing ones from our template gallery.
To create your own databoard, click on Databoards and select the + Create New Databoard followed by the Start Blank option.
Click on the Metric Library icon on the left-hand side of the Designer, click on the All data sources button, and select Facebook Ads from the drop-down menu.
Pick ROAS from the list of pre-build Facebook Ads Datablocks in the Metrics Library and drag-and-drop it onto your Databoard.
If you’d rather use a pre-built template, navigate to Databoards and select Public Templates. Pick Facebook Ads from the Data Source drop-down list.
From there, you can preview templates populated with dummy data or pull them into your account and re-populate them with your own Facebook Ads data.
You can find more about using Facebook Ads with Databox here.
Want to make sure your Facebook ads are performing and trending in the right direction? There are several types of metrics you should track, from costs to campaign engagement to ad-level engagement, and so on.
Here are a few we’d recommend focusing on.
Tracking these metrics in Facebook Ads Manager can be overwhelming since the tool is not easy to navigate and the visualizations are quite limiting. It’s also a bit time-consuming to combine all the metrics you need in one view.
We’ve made this easier by building a plug-and-play Facebook Ads dashboard that takes your data and automatically visualizes the right metrics to give you an in-depth analysis of your ad performance.
With this Facebook Ads dashboard, you can quickly discover your most popular ads and see which campaigns have the highest ROI, including details such as:
And more…
You can easily set it up in just a few clicks – no coding required.
To set up the dashboard, follow these 3 simple steps:
Step 1: Get the template
Step 2: Connect your Facebook Ads account with Databox.
Step 3: Watch your dashboard populate in seconds.
Ready to optimize your ad spend on Facebook? Instead of wasting time in trial and error to figure out what works, try these proven tips:
According to Andrew Schutt of Schutt Media, you should, “call out your audience’s pain points first thing in the ad. As a result, your cost-per-conversion will drop, and you’ll be getting more bang for the same buck.”
Blink SEO’s Sam Wright concurs, “the vast majority of campaigns fail because they focus on telling their audience about a product or service, rather than helping them solve a problem. No amount of audience targeting or clever delivery can make up for bad positioning.”
“The best tried and tested tip to maximize your ROAS is to identify your target audience,” opines Srish Agrawal of A1 Future Technologies Pvt. Ltd.
“Your targeting can make or break your ad campaign. It all depends upon the kind of audience you are targeting and whether you know them precisely or not.
Craft hyper-targeted campaigns based on Demographics, Interests, Brand Selection, and Habits.
These personalized layers could get you smaller but more filtered audiences. This refined chunk of the audience is more interested in your product and is more likely to buy it, thus giving your ad spend an accomplishment.”
inSegment’s Meghan Kearney focuses on exact details. “I would suggest targeting the area of your business and adding a 25-mile radius, and layering that location targeting with a specific age range you would like to target. I then would suggest adding detailed targeting and would layer specific interests with other targeting criteria, such as field of study, education, etc.”
“Typically, when setting up campaigns, I will create a national campaign within a close radius of the business. An International campaign is set if the product has an international clientele and a retargeting campaign in which you can target people who have visited a particular page of your website. Targeting the right audience is the best way to find high intent Facebook users and optimize ROI.”
Ben Arndt from DUNK Basketball shares his company’s example as well: “We know through analytics and sales data that our key market is 18-49 males, who like basketball, and are located within a set of 5 of Australia’s capital cities.”
“When we run a campaign on Facebook, we’ll specifically target this group and nobody else. This laser focus ensures optimal spend on ad spend and generally generates a minimum 5x return.”
Related: Facebook Ad Targeting: The 4 Essentials for Finding Your Audience
“Optimizing ROAS on Facebook requires ongoing and proactive experimentation,” notes QuanticMind’s Brian Bird.
“Consistently refresh your ad creative. Use the results to iterate, and if needed, pivot quickly.”
You can also continuously test your “ad copy, creative, promotions, headlines, audiences, etc.,” shares Mike Vossen of Vendasta.
“Whether a campaign is running well or poorly, you can always test out different items within the campaign to see if you can improve on your current results,” Vossen elaborates.
“Overall, there are a few things that you should always consider in your campaign messaging:
Colin Little of Social Launch Marketing shares that the best way to maximize ROAS is to send a thank you message to 1st-time customers.
“I personally have my e-commerce clients shoot a short thank you video from the owner to use as a post-purchase retargeting ad,” Little adds.
“Also, add a nice message in your welcome email from customers and let them know about a secret deal only 1st-time customers get. This will help you snag a few extra orders to boost revenue per customer.”
The reason? “It usually takes 3 times of seeing a company’s ad before it resonates enough for a conversion,” says BoardActive’s Cierra Flythe. So, you need to “see who is looking at your ads, and retarget them with more information for a higher return rate.”
CJ Xia from Boster Biological Technology agrees. “Targeting your campaign at the right audience is an excellent way to optimize ROAS. For this purpose, you need to go beyond basic demographics because it is important, and your ads should target basic demographics like gender, age, location, etc.“
Megan Smith of Dosha Mat explains how to set up a Facebook retargeting campaign: “Situate yourself in the shoes of the persons to whom the re-targeting campaign will be targeted and ask why they did not convert upon their first visit to your website.”
“Facebook Audience Insights (FAI) is the best way to target your Facebook ads because it provides vital information about your Facebook followers. From FAI, you can create your target audience by filtering through demographics and other useful details.”
“Is there something you can do to improve your offer to increase the likelihood that they will be converted through the re-marketing campaign? Often, users leave a site without converting because the price or delivery cost for the product or service was too high for them.”
“To help address that pain point and optimize for conversions, consider incorporating a discount or other promotion into your retargeting campaign to give these users additional incentive to convert. Making that kind of change can dramatically increase the success of a re-targeting campaign.”
Related: Reduce Your Facebook Ad CPM with These 10 Pro Tips
Jonathan Aufray of Growth Hackers suggests, “to optimize your Facebook RoaS (Return on ad Spend), you want to monitor and track your data continuously. This way, you will be able to delete your low-performing ads, optimize the ads that are doing ok, scale, and double down on the ads that are performing well.”
So, you shouldn’t only ensure your data is correct, but keep monitoring it regularly with the help of a social media dashboard software.
PRO TIP: Looking for ways to visualize your ROAS from Facebook Ads?Watch this video to learn how to set up and track your ROAS alongside other important metrics to effectively track the performance of your ads.
“One tip for optimizing your return-on-ad-spend on Facebook is to make sure you’re using dayparting if you have any time-sensitive offers,” comments The Advisor Coach LLC’s James Pollard.
“For example, I’ve seen a lot of people run webinar ads 24/7 even though their webinars are only available during the day.”
“People are much more likely to take advantage of a time-sensitive offer if it’s in the near future. So, if a webinar is running at 11:00 a.m. and 4 p.m. every day, you can get a big boost in ROAS by only showing the ad during the day,” Pollard concludes.
Meara McNitt of Digital Marketing Miami says, “arbitrarily building an audience will never be as accurate as using actual client data. However, “by using a Facebook Pixel or email list to create lookalike audiences (ideally 3%), you essentially create a perfectly developed buyer persona rather than trying to create one yourself using demographic and behavior details.”
“You should use those details to further refine this lookalike audience based on any specific targeting, such as parents or online shoppers.”
Related: How to Create a Facebook Lookalike Audience & Expand Your Reach
“When creating Facebook campaigns that drive revenue, it’s essential to optimize your campaign objective for a conversion-based goal,” suggests ClickThrough’s Lachlan Kirkwood.
“By selecting a frequently occurring conversion event, it allows Facebook’s ad algorithm to quickly optimize and deliver the best results. For example – if you’re a relatively new e-commerce store, your conversion objective should be an ‘add to cart event’ as it will acquire more conversions than a ‘purchase’ event. The faster an ad set trains through the learning period, the better ROAS it will produce.”
Use these free social media dashboard examples to see if your campaigns end up driving as many conversions as you desire.
“Make sure you have conversion tracking set up,” says Daniella Pozzolungo of PupDigital. “If you are an e-commerce store, this is much easier to report on with the Facebook Pixel. If you aren’t an e-commerce store, you need to know your numbers.”
“Know exactly what a lead is worth to you, your conversion rate from lead to customer/client. Once you know these numbers, you can test various audiences and ads to see which will eventually generate the most ROAS for you. To optimize, remove any low ROAS ads or ad sets, and always test new ads or ad sets to see how they perform against your goals.”
If you want to maximize the return on investment of your Facebook advertising campaigns, you need to keep track of the return on ad spend.
But there’s a lot to keep track of, and you need to get as many of the details right as possible. It takes more than simply knowing how to calculate ROAS for Facebook ads. You need to monitor a variety of metrics and understand how they interact between various ad campaigns and affect your bottom line.
This is where Databox comes in.
It offers over 70 integrations that allow you to connect and automatically pull data from any data source and build eye-catching visualizations that will make understanding your Facebook ROAS and other relevant metrics very easy to understand.
With Databox’s dashboards, you can easily track key metrics such as ad spend, conversions, and return on ad spend in real time. You can also set up alerts to notify you of any changes.
The platform’s robust reporting capabilities allow you to create customizable reports to share with your team and stakeholders, providing a clear overview of your campaign performance.
Finally, with Databox’s Benchmark Groups, you can compare your campaign performance to industry averages, helping you identify areas for improvement and allowing you to stay ahead of the competition.
The whole thing is incredibly simple to set up, use, and customize. You can even get help from our customer support team if you’re having any trouble.
Just create your free Databox account and make monitoring, reporting, and benchmarking easier than ever.
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