Digital advertising has been booming in recent years. At the same time, we’re seeing stricter data protection laws and the rise of first-party data.
With this, comes the need for sharper metrics to measure your advertising success. One of the go-to metrics most of us relied on for several years was Return on Ad Spend (ROAS), a key indicator of how well our ads are performing.
But as online advertising became more complex, so did the campaigns. You’re mostly no longer limited to one channel or ad type. Instead, your advertising efforts likely span multiple platforms and formats.
As a result, we need a more comprehensive way to measure overall marketing performance. This is where Blended ROAS comes in.
What is Blended ROAS?
Blended ROAS is a metric that calculates the overall effectiveness of your marketing by measuring the ratio of total revenue (from all sources, not just paid ads) to total ad spend.
Unlike traditional ROAS, which only looks at platform-specific return, blended ROAS considers your entire revenue stream—whether it’s from organic traffic, repeat customers, or email marketing.
Here’s how it’s calculated:
Blended ROAS = (Total Revenue / Total Ad Spend) * 100
Why is Blended ROAS important?
As data protection laws get stricter, we’re losing more precise data in individual advertising channels. And much of the data we have is now modeled and not fully clear.
These changes mean that the ROAS we’ve relied on for each channel is not reliable. So it’s harder to see exactly what impact each advertising investment has on our bottom line.
A blended ROAS approach combines all expenses and revenues across channels, providing a more realistic view of the overall impact of your marketing efforts.
There are several reasons why Blended ROAS is important, especially in today’s multi-channel marketing environment:
1. It gives you a holistic view of your marketing performance.
With so many digital channels driving revenue, relying on individual platform ROAS doesn’t tell you the full story. Blended ROAS gives you a more complete view of your advertising effectiveness and lets you evaluate our marketing strategy in its overall context.
2. It helps you make better-informed budget allocation decisions.
By understanding your overall return, you can make better-informed decisions about where to allocate your budget. For instance, if a channel has a low individual ROAS but contributes significantly to your overall revenue, you may still want to continue investing in it.
3. It factors in the long-term value of repeat customers.
A lower ROAS on a particular campaign may still be valuable if that campaign is bringing in repeat customers. Blended ROAS helps account for this, as it measures how all touchpoints contribute to your long-term success.
How to work with Blended ROAS?
Step 1: Gather data for all your channels.
Start by tracking total revenue and total ad spend regularly. Then, review and gather data for all your marketing channels, both expenses and revenue.
Step 2: Calculate your Blended ROAS regularly.
Calculate your total blended ROAS by comparing total expenses with total revenue from your backend.
Monthly or weekly calculations will give you a good sense of how your blended ROAS fluctuates and when adjustments are needed.
Make sure you include all revenue sources in your calculations. This includes organic traffic, social media, email marketing, and any other channel that contributes to your overall sales.
Step 3: Adjust Blended ROAS based on Customer Lifetime Value (CLV).
Blended ROAS becomes even more valuable when combined with Customer Lifetime Value. If you’re acquiring customers at a lower upfront profit but they stick around and make multiple purchases, your blended ROAS will help justify those initial costs.
Step 4: Adjust your strategy based on this data.
Use Blended ROAS to regularly adjust your marketing strategy and budget allocation. It helps you make sure to invest where it provides the most return in terms of overall business growth.
When you’re looking to scale, Blended ROAS can help you determine whether or not you’re ready to increase ad spend. If your blended ROAS remains healthy, it indicates that your overall marketing efforts are effective and can handle increased investment.
Read more: Andrew Lolk, Founder & CEO of SavvyRevenue discussed in detail how you can work with Blended ROAS in this article.
But, Blended ROAS is not a magic bullet that works for every advertiser.
There are challenges with Blended ROAS too.
1. Accurate tracking across all channels is essential.
To calculate Blended ROAS effectively, you need accurate tracking for every channel and ad type in your campaign. This can be challenging, especially when you’re using different tracking systems for various platforms.
2. Blended ROAS can be tricky to compare between campaigns.
Comparing Blended ROAS across campaigns isn’t always straightforward, as the performance of channels and ad types can vary based on campaign goals and target audiences.
3. It may overlook long-term advertising impacts.
Blended ROAS only measures revenue generated during the campaign period, which means it might miss the long-term effects of your ads on customer behavior and brand awareness.
However, despite these challenges, the advantages of Blended ROAS far outweigh its limitations—especially if you’re using a robust attribution and ad automation platform. These tools can simplify tracking by centralizing data from multiple channels, giving you the ability to make real-time, informed decisions.
Implement Blended ROAS in your marketing strategy
Marketers have grown accustomed to an abundance of data that tells us exactly which ads perform best and how many purchases each one generates. But it’s important to remember that advertising existed long before this level of granular data was available.
In short, this transition is just a return to basics and not one to be feared.
While it’s important to look at platform metrics, focusing solely on them limits your ability to see the full impact of your advertising efforts.
At the end of the day, the key questions remain: What are your revenues? What are your expenses? And how is your marketing spend contributing to the bigger picture?
Read more about ecommerce paid search on the SavvyRevenue blog.
