Please check an old thread on same topic. Two top contributors explained ROAS very well.
Hope this helps.
Hello @siva k,
“Target ROAS” is a type of portfolio bid strategy that automates bidding across multiple campaigns, ad groups, and keywords to help achieve an average return on ad spend (ROAS) equal to the target you set. This article explains how the portfolio “target ROAS” bid strategy works and what its settings are.
AdWords predicts future conversions and associated values using your reported conversion values, which you report through conversion tracking. Then, AdWords will set maximum cost-per-click (max. CPC) bids to maximize your conversion value, while trying to achieve an average return on ad spend (ROAS) equal to your target.
Using "target ROAS" with different campaign types:
- For Search Network only and Search Network with Display Select campaigns, AdWords will try to achieve an average ROAS equal to your target across all keywords, ad groups, and campaigns using this strategy.
- For Display Network only campaigns, AdWords will achieve an average ROAS equal to your target across all ad groups and campaigns using this strategy. Note that “target ROAS” can't be used for the "Display Network only - Mobile apps" campaign type or the “Display Network only” campaign type with “Install your mobile app” or “Engage with your mobile app” objectives.
- For Shopping campaigns, AdWords will try to achieve an average ROAS equal to your target across all ad groups, and campaigns using this strategy.
Some conversions may return a higher ROAS and some may return a lower ROAS, but altogether AdWords will try to keep your conversion value per cost equal to the target ROAS you set. For example, if you set a target ROAS of 500%, AdWords will automatically adjust your bids to try to maximize your conversion value, while reaching this target ROAS. To help improve your performance in ad auctions, this strategy adjusts bids using real-time details like device, browser, location, and time of day. It also automatically adjusts bids based on whether or not someone is on one of your remarketing lists.
AdWords will recommend a target ROAS value after you’ve set up a new bid strategy in the Shared library and chosen which campaigns to apply it to. This recommendation is calculated based on your actual ROAS over the last few weeks. We’ll exclude performance from the last few days to account for conversions that may take more than a day to complete following an ad click. You can choose whether to use this recommended target ROAS value or to set your own.
Let's say you're measuring sales for your online women's shoe store and you want to optimize your bids based on the value of a shopping cart total. Your goal is $5 worth of sales (this is your conversion value) for each $1 you spend on ads. You'd set a target ROAS of 500% - for every $1 you spend on ads, you'd like to get 5 times that in revenue.
Here's the math:
$5 in sales ÷ $1 in ad spend x 100% = 500% target ROAS
Then, AdWords will automatically set your max. CPC bids to maximize your conversion value, while trying to reach your target ROAS of 500%.
Bid adjustments and "target ROAS"
Bid adjustments allow you to show your ads more or less frequently based on where, when, and how people search. Because “target ROAS” helps optimize your bids based on real-time data, your existing bid adjustments are not used. There is one exception: You can still set mobile bid adjustments of -100%. Note that you don’t need to remove bid adjustments—they just won’t be used.
Syed Sayem Mustafa
ROAS learning[ Edited ]
October 2016 - last edited October 2016
What specifically, have you changed in your campaign since you began to test applying the ROAS strategy?
Keep in mind, Google's automated bid management settings do not always work. You need to have enough conversion data for their algorithms to reliably detect patterns. It works best on campaigns which convert in a very systematic pattern. I have had some successes with it, but also plenty of failures.