If you're a marketer in the world of digital advertising, you've likely heard of target ROAS (tROAS). Part of Google Ads Smart Bidding, this strategy allows you to set a specific goal for your campaigns, helping you inch closer to the desired revenue.
This guide will cover everything you need to know about tROAS marketing, including how to set it up, how to troubleshoot your campaigns, plus an actionable ROAS formula for Google ads you can use today.
Target ROAS, or Target Return on Ad Spend, is an Automated Smart Bidding strategy in Google Ads that lets you set a specific goal for the revenue you want to generate from your ad spend.
Smart Bidding refers to “bid strategies that use Google AI to optimize for conversions or conversion value in each and every auction—a feature known as “auction-time bidding,’” according to Google.
For example, if you set your goal of 500%, then you're telling Google Ads that for every $1 you spend on advertising, you want to generate at least $5 in revenue. Google does this by tactically adjusting CPC (Cost per Click) bids to bring you your desired return.
It's a derivitive of ROAS, much like breakeven ROAS or Facebook ROAS. Wondering how it differs from Return on Investment? See ROI vs ROAS for more.
Once you set a target ROAS at the campaign level, Google completely takes control over your keyword bids. Google will dictate CPCs for your entire campaign, adjusting bids based on performance.
Other things to keep in mind:
Use this approach when certain conditions make it the right fit for your campaign goals. And don’t be afraid to test other bidding strategies if it’s not the right time for tROAS marketing to shine.
Use tROAS when:
Avoid tROAS if:
To really understand the path to tROAS, it helps to know how it compares to other automated bidding strategies. Let’s review.
Max Conversions (Maximize Conversions) is an automated bidding strategy designed to generate the highest possible number of conversions within your daily budget.
Target CPA (Target Cost Per Action) is an optional setting within Max Conversions that tries to get as many conversions as possible at or below a specified average cost per conversion. In other words, the meaning of target CPA is when you tell Google how much you’re willing to pay for each acquisition, and Google adjusts bids in real time to try to hit that target.
Unlike Max Conversions, which prioritizes generating the highest number of conversions, this strategy focuses on driving the greatest conversion value from your budget.
Target ROAS is located under the Max Conversion Value option. Using Google’s AI, this strategy predicts the value of each potential conversion whenever a user searches for products or services you’re advertising. So, if Google’s AI determines that a search is likely to lead to a high-value conversion, target ROAS will bid higher on that auction. If the search is less likely to result in a valuable conversion, it will bid lower.
These two bidding strategies function very similarly, but there is a key difference to keep in mind when choosing one over the other.
You set the target ROAS when you choose the "max conversion value" bidding strategy on Google. tROAS pushes Google to generate a specific return on your ad spend.
For example, you set tROAS to 500%, which means you plan to earn $5 for every $1 you spend. Therefore, tROAS also takes into account your order value.
Target CPA meaning, however, when you choose the "max conversions" bidding strategy. So, Google will adjust your bids to hit your CPA goal. You're asking for a specific cost per conversion with tCPA. I.e: I want to spend $15 for a purchase! tCPA does not take your account order value into consideration.
You can set an automated bid strategy in any (or all) of your Search campaigns, Display campaigns, Shopping campaigns, and Performance Max campaigns.
To calculate your Google ads ROAS number, you'll need to know three key pieces of information:
Google sets the ROAS target as a percentage, so you'll have to multiply your ROAS equation by 100. Here is the ROAS formula for Google ads:
ROAS = (Revenue / Ad Spend) x 100
So, if your campaign spent $5,000 and generated $10,000 in revenue, the ROAS for the campaign is 200%. (10000 / 5000 x 100 = 200)
If you are targeting to spend $5,000 and generate $15,000, you would set your ROAS target to 300%. (15000 / 5000 x 100 = 300)
Try our free Target ROAS calculator here.
Most companies aim to achieve a ROAS of 4x, or 400%. Data shows, however, that the average ROAS across ecommerce is around 2X, or 200%.
What you consider a good ROAS for Google ads depends on your historical data. Google states your “ROAS target should be at or below the ROAS compared to your historical performance.”
So think of this bidding strategy as a way to put cruise control on all the hard work you’ve done arriving at your target ROAS percentage, not as a way to steer all your results.
Integrating target ROAS with strategies like Maximize Conversions or Manual CPC can enhance your ad performance by utilizing the strengths of each approach.
Use target ROAS when you're focused on achieving a specific return on ad spend, while pairing it with Maximize Conversions can drive volume, especially in growth phases. Manual CPC might be employed for precision, adjusting bids where automation won't suffice.
Target ROAS provides a structured approach to scaling campaigns, supporting long-term growth by allocating spend efficiently. Set realistic ROAS targets based on historical performance and gradually increase targets as your campaigns stabilize and deliver consistent returns.
Manage ad spend by monitoring performance metrics and adjusting budgets as needed to maximize returns. Ensure your tROAS goals align with your overall budget strategies, and be prepared to adjust targets in response to seasonal shifts or changing market conditions for optimal results.
When dealing with underperforming target ROAS campaigns, it's crucial first to identify whether your ROAS setting is too aggressive or conservative.
Warning signs might include decreased conversion rates or unexpected ad spending.
Once identified, adjust your target ROAS based on current performance metrics — lower it if your targets aren't being met or raise it if your performance exceeds expectations.
Additionally, consider the impact of seasonality, as consumer behavior often shifts with seasonal trends or events. These changes can influence campaign outcomes, requiring careful monitoring and timely adjustments.
By understanding these dynamics and responding proactively, you can optimize your campaigns for better performance and ensure they align with your business objectives.
While target ROAS can significantly improve performance for many advertisers, it’s not a one-size-fits-all strategy. Understanding its limitations is key to using it effectively.
Using a target ROAS bidding strategy only works for businesses that carry a dollar-value revenue. It won't work for any free products, including digital products and tools. This means that it's important for Google Ads to be recording revenue that comes in from purchases.
In the Google Ads dashboard, if your "conversions" metric is >1, but your "Conversion value" metric does not reflect the true value of the goods bought, then your product prices aren't linked to Google Ads. Make sure Google is recording the actual conversion value of a sale.
To fix this, go to Tools & Settings, then choose:
It’s important to note that the target ROAS bidding strategy will not work with lead accounts, though.
To follow up on the last point, proper conversion tracking is imperative for any of Google's automated bidding strategies to work properly.
Another common mistake is not having enough conversion data. Google's Smart Bidding thrives on data. Do not set a campaign up from scratch and set it to "Maximize Conversion Value."
Google does not know what your values are at that stage, your actual ROAS, or who is most likely to buy at which costs.
Start with Manual CPC until you have 50 conversions in the campaign, and then switch over to Maximize Conversion Value, continuing with your target ROAS bidding strategy.
To really understand what good tROAS is, it helps to start with good historical data. That data lets you make smarter, more informed decisions as an advertiser.
Think of tROAS as a way to use Google’s automation to your advantage — it helps lighten your workload and keep things efficient, rather than aiming for unrealistic goals.
For example, if your current ROAS is around 200%, try nudging your target to 250% instead of shooting for 900%. Setting it too high can actually stop Google from delivering your ads.
The learning phase usually takes about a week, and once you’re hitting your target, you can slowly raise it by about 20%. In the meantime, use that time to fine-tune your campaigns and optimize your account.
Now that you know some of the pitfalls, take a look at these key tactics so you can make the most of your target ROAS bidding campaigns and drive efficient growth.
TROAS works best if your products have similar ROAS performance. If your Google Ads account has varying products with a wide range of prices, setting a target ROAS can cause Google to focus only on a few of your highest return products.
For example, if you have a product that is $8, while another product is $80, and you spent $4 to acquire each. The first product generates a very different ROAS from the second product (ROAS of 2 vs. ROAS of 20). Google will focus its budget on the second product since it's more likely to achieve your desired ROAS.
Although you'll still be making more revenue, you'll probably have a few products that are not generating any revenue through Google Ads, in this case.
A solution for this is to group your keywords with similar ROAS by campaign, then run a tROAS in each of the separate campaigns.
Target ROAS is not the solution to your campaigns performing below what you expect. It is the push that some campaigns may need once it's exhausted all its other options. Do not expect a poor-performing campaign to perform well if you include a target ROAS suddenly.
In addition to all of this, you're also able to choose the "Maximize Conversion Value" bidding strategy without a tROAS. This could be a good idea to start off, while you get an understanding of your campaign's ROAS as a whole. Once it performs well without a tROAS, then you can confidently set a target ROAS.
Increasing revenue does not mean that Google is increasing spending. In this case, Google is actually spending less to acquire higher revenue. Therefore, as you continue to increase your tROAS in Google, you may see a dip in spend. This can make it tricky to scale using tROAS, as increasing your target may not necessarily push your Google Ads campaign to spend.
If this is happening, it's a good idea to run the campaign at a Max Conversions to ramp up spend. Once spend is high enough, you can switch it again to a tROAS. Switch it back again once you see that spend is low again and you want to stop spending at a high cost.
When managing Google Ads campaigns, it's crucial to dispel common myths surrounding Target ROAS.
The first myth assumes that a higher target ROAS will automatically yield better results. However, aiming for a high tROAS without considering the overall strategy might not increase ROAS and could limit the reach of your ads.
The second myth suggests that target ROAS can resolve all bidding issues. In reality, it is only a component of a comprehensive bidding strategy, and relying solely on it might overlook valuable adjustments specific to your campaign needs.
Lastly, the myth of "set it and forget it" overlooks the necessity of regular optimization and monitoring. Continuous adjustments and evaluations are essential for adapting to changes in market dynamics and maximizing campaign performance.
Now that you know the depths of what tROAS is, advanced optimization involves refining strategies to maximize effectiveness.
One key technique is leveraging audience segmentation, which allows advertisers to adjust bids based on specific customer groups, thereby increasing conversion rates and optimizing the return on ad spend.
They enable advertisers to schedule ads during peak times and optimize for devices with higher conversion rates, ensuring resources are allocated efficiently.
Additionally, incorporating bid modifiers for location, audience, and demographic factors provides further precision in campaign adjustments. These bid modifiers allow for tailored targeting that can address dynamic market conditions and consumer behavior, ultimately enhancing the performance and profitability of the campaigns.
When running a target ROAS strategy, it is crucial to focus on specific KPIs such as conversion value, cost per action, and conversion rate.
These metrics help assess the effectiveness of your campaigns in achieving the desired return on ad spend. Consistently monitoring these indicators allows you to make data-driven decisions and optimize your overall strategy.
Analyzing sufficient conversion data is vital for spotting trends that can inform future ROAS goals. Use past performance insights to identify patterns in customer behavior and adjust your strategies accordingly. Regularly review and update your ROAS targets based on these findings to maintain campaign effectiveness.
Understanding attribution models is essential as they impact ROAS calculations and allow you to implement smart bidding strategies.
Different models allocate credit to conversion paths in varied ways, affecting how you interpret campaign performance. Choose an appropriate attribution model to ensure accurate ROI measurement and better-informed bidding decisions.
Accurate revenue tracking is essential for the success of a target ROAS campaign because it ensures that the returns measured truly reflect the ads' effectiveness. Proper tracking allows advertisers to optimize bids and strategies, leading to better allocation of advertising budgets and improved campaign performance.
To set up conversion tracking effectively in Google Ads:
Common mistakes in revenue tracking include inaccurate tracking codes, incomplete data integration, and neglecting cross-device and cross-platform behaviors.
Avoid these by conducting regular audits, using comprehensive tracking methods, and continually refining the tracking process to adapt to changes in consumer behavior.
Although there are a lot of nuances when it comes to setting a target ROAS in Google Ads, it’s a valuable tool for businesses looking to generate a specific return on their ad spend. Depending on your business objectives, it's a great idea to dive into different bidding strategies, leaning on Google's automation to drive your efforts.
No matter your next move – great bidding strategies always start with great data. Track, measure, and optimize your ad performance in real time with Triple Whale, the smarter way for brands to understand and grow with confidence. Book a demo today.
If you're a marketer in the world of digital advertising, you've likely heard of target ROAS (tROAS). Part of Google Ads Smart Bidding, this strategy allows you to set a specific goal for your campaigns, helping you inch closer to the desired revenue.
This guide will cover everything you need to know about tROAS marketing, including how to set it up, how to troubleshoot your campaigns, plus an actionable ROAS formula for Google ads you can use today.
Target ROAS, or Target Return on Ad Spend, is an Automated Smart Bidding strategy in Google Ads that lets you set a specific goal for the revenue you want to generate from your ad spend.
Smart Bidding refers to “bid strategies that use Google AI to optimize for conversions or conversion value in each and every auction—a feature known as “auction-time bidding,’” according to Google.
For example, if you set your goal of 500%, then you're telling Google Ads that for every $1 you spend on advertising, you want to generate at least $5 in revenue. Google does this by tactically adjusting CPC (Cost per Click) bids to bring you your desired return.
It's a derivitive of ROAS, much like breakeven ROAS or Facebook ROAS. Wondering how it differs from Return on Investment? See ROI vs ROAS for more.
Once you set a target ROAS at the campaign level, Google completely takes control over your keyword bids. Google will dictate CPCs for your entire campaign, adjusting bids based on performance.
Other things to keep in mind:
Use this approach when certain conditions make it the right fit for your campaign goals. And don’t be afraid to test other bidding strategies if it’s not the right time for tROAS marketing to shine.
Use tROAS when:
Avoid tROAS if:
To really understand the path to tROAS, it helps to know how it compares to other automated bidding strategies. Let’s review.
Max Conversions (Maximize Conversions) is an automated bidding strategy designed to generate the highest possible number of conversions within your daily budget.
Target CPA (Target Cost Per Action) is an optional setting within Max Conversions that tries to get as many conversions as possible at or below a specified average cost per conversion. In other words, the meaning of target CPA is when you tell Google how much you’re willing to pay for each acquisition, and Google adjusts bids in real time to try to hit that target.
Unlike Max Conversions, which prioritizes generating the highest number of conversions, this strategy focuses on driving the greatest conversion value from your budget.
Target ROAS is located under the Max Conversion Value option. Using Google’s AI, this strategy predicts the value of each potential conversion whenever a user searches for products or services you’re advertising. So, if Google’s AI determines that a search is likely to lead to a high-value conversion, target ROAS will bid higher on that auction. If the search is less likely to result in a valuable conversion, it will bid lower.
These two bidding strategies function very similarly, but there is a key difference to keep in mind when choosing one over the other.
You set the target ROAS when you choose the "max conversion value" bidding strategy on Google. tROAS pushes Google to generate a specific return on your ad spend.
For example, you set tROAS to 500%, which means you plan to earn $5 for every $1 you spend. Therefore, tROAS also takes into account your order value.
Target CPA meaning, however, when you choose the "max conversions" bidding strategy. So, Google will adjust your bids to hit your CPA goal. You're asking for a specific cost per conversion with tCPA. I.e: I want to spend $15 for a purchase! tCPA does not take your account order value into consideration.
You can set an automated bid strategy in any (or all) of your Search campaigns, Display campaigns, Shopping campaigns, and Performance Max campaigns.
To calculate your Google ads ROAS number, you'll need to know three key pieces of information:
Google sets the ROAS target as a percentage, so you'll have to multiply your ROAS equation by 100. Here is the ROAS formula for Google ads:
ROAS = (Revenue / Ad Spend) x 100
So, if your campaign spent $5,000 and generated $10,000 in revenue, the ROAS for the campaign is 200%. (10000 / 5000 x 100 = 200)
If you are targeting to spend $5,000 and generate $15,000, you would set your ROAS target to 300%. (15000 / 5000 x 100 = 300)
Try our free Target ROAS calculator here.
Most companies aim to achieve a ROAS of 4x, or 400%. Data shows, however, that the average ROAS across ecommerce is around 2X, or 200%.
What you consider a good ROAS for Google ads depends on your historical data. Google states your “ROAS target should be at or below the ROAS compared to your historical performance.”
So think of this bidding strategy as a way to put cruise control on all the hard work you’ve done arriving at your target ROAS percentage, not as a way to steer all your results.
Integrating target ROAS with strategies like Maximize Conversions or Manual CPC can enhance your ad performance by utilizing the strengths of each approach.
Use target ROAS when you're focused on achieving a specific return on ad spend, while pairing it with Maximize Conversions can drive volume, especially in growth phases. Manual CPC might be employed for precision, adjusting bids where automation won't suffice.
Target ROAS provides a structured approach to scaling campaigns, supporting long-term growth by allocating spend efficiently. Set realistic ROAS targets based on historical performance and gradually increase targets as your campaigns stabilize and deliver consistent returns.
Manage ad spend by monitoring performance metrics and adjusting budgets as needed to maximize returns. Ensure your tROAS goals align with your overall budget strategies, and be prepared to adjust targets in response to seasonal shifts or changing market conditions for optimal results.
When dealing with underperforming target ROAS campaigns, it's crucial first to identify whether your ROAS setting is too aggressive or conservative.
Warning signs might include decreased conversion rates or unexpected ad spending.
Once identified, adjust your target ROAS based on current performance metrics — lower it if your targets aren't being met or raise it if your performance exceeds expectations.
Additionally, consider the impact of seasonality, as consumer behavior often shifts with seasonal trends or events. These changes can influence campaign outcomes, requiring careful monitoring and timely adjustments.
By understanding these dynamics and responding proactively, you can optimize your campaigns for better performance and ensure they align with your business objectives.
While target ROAS can significantly improve performance for many advertisers, it’s not a one-size-fits-all strategy. Understanding its limitations is key to using it effectively.
Using a target ROAS bidding strategy only works for businesses that carry a dollar-value revenue. It won't work for any free products, including digital products and tools. This means that it's important for Google Ads to be recording revenue that comes in from purchases.
In the Google Ads dashboard, if your "conversions" metric is >1, but your "Conversion value" metric does not reflect the true value of the goods bought, then your product prices aren't linked to Google Ads. Make sure Google is recording the actual conversion value of a sale.
To fix this, go to Tools & Settings, then choose:
It’s important to note that the target ROAS bidding strategy will not work with lead accounts, though.
To follow up on the last point, proper conversion tracking is imperative for any of Google's automated bidding strategies to work properly.
Another common mistake is not having enough conversion data. Google's Smart Bidding thrives on data. Do not set a campaign up from scratch and set it to "Maximize Conversion Value."
Google does not know what your values are at that stage, your actual ROAS, or who is most likely to buy at which costs.
Start with Manual CPC until you have 50 conversions in the campaign, and then switch over to Maximize Conversion Value, continuing with your target ROAS bidding strategy.
To really understand what good tROAS is, it helps to start with good historical data. That data lets you make smarter, more informed decisions as an advertiser.
Think of tROAS as a way to use Google’s automation to your advantage — it helps lighten your workload and keep things efficient, rather than aiming for unrealistic goals.
For example, if your current ROAS is around 200%, try nudging your target to 250% instead of shooting for 900%. Setting it too high can actually stop Google from delivering your ads.
The learning phase usually takes about a week, and once you’re hitting your target, you can slowly raise it by about 20%. In the meantime, use that time to fine-tune your campaigns and optimize your account.
Now that you know some of the pitfalls, take a look at these key tactics so you can make the most of your target ROAS bidding campaigns and drive efficient growth.
TROAS works best if your products have similar ROAS performance. If your Google Ads account has varying products with a wide range of prices, setting a target ROAS can cause Google to focus only on a few of your highest return products.
For example, if you have a product that is $8, while another product is $80, and you spent $4 to acquire each. The first product generates a very different ROAS from the second product (ROAS of 2 vs. ROAS of 20). Google will focus its budget on the second product since it's more likely to achieve your desired ROAS.
Although you'll still be making more revenue, you'll probably have a few products that are not generating any revenue through Google Ads, in this case.
A solution for this is to group your keywords with similar ROAS by campaign, then run a tROAS in each of the separate campaigns.
Target ROAS is not the solution to your campaigns performing below what you expect. It is the push that some campaigns may need once it's exhausted all its other options. Do not expect a poor-performing campaign to perform well if you include a target ROAS suddenly.
In addition to all of this, you're also able to choose the "Maximize Conversion Value" bidding strategy without a tROAS. This could be a good idea to start off, while you get an understanding of your campaign's ROAS as a whole. Once it performs well without a tROAS, then you can confidently set a target ROAS.
Increasing revenue does not mean that Google is increasing spending. In this case, Google is actually spending less to acquire higher revenue. Therefore, as you continue to increase your tROAS in Google, you may see a dip in spend. This can make it tricky to scale using tROAS, as increasing your target may not necessarily push your Google Ads campaign to spend.
If this is happening, it's a good idea to run the campaign at a Max Conversions to ramp up spend. Once spend is high enough, you can switch it again to a tROAS. Switch it back again once you see that spend is low again and you want to stop spending at a high cost.
When managing Google Ads campaigns, it's crucial to dispel common myths surrounding Target ROAS.
The first myth assumes that a higher target ROAS will automatically yield better results. However, aiming for a high tROAS without considering the overall strategy might not increase ROAS and could limit the reach of your ads.
The second myth suggests that target ROAS can resolve all bidding issues. In reality, it is only a component of a comprehensive bidding strategy, and relying solely on it might overlook valuable adjustments specific to your campaign needs.
Lastly, the myth of "set it and forget it" overlooks the necessity of regular optimization and monitoring. Continuous adjustments and evaluations are essential for adapting to changes in market dynamics and maximizing campaign performance.
Now that you know the depths of what tROAS is, advanced optimization involves refining strategies to maximize effectiveness.
One key technique is leveraging audience segmentation, which allows advertisers to adjust bids based on specific customer groups, thereby increasing conversion rates and optimizing the return on ad spend.
They enable advertisers to schedule ads during peak times and optimize for devices with higher conversion rates, ensuring resources are allocated efficiently.
Additionally, incorporating bid modifiers for location, audience, and demographic factors provides further precision in campaign adjustments. These bid modifiers allow for tailored targeting that can address dynamic market conditions and consumer behavior, ultimately enhancing the performance and profitability of the campaigns.
When running a target ROAS strategy, it is crucial to focus on specific KPIs such as conversion value, cost per action, and conversion rate.
These metrics help assess the effectiveness of your campaigns in achieving the desired return on ad spend. Consistently monitoring these indicators allows you to make data-driven decisions and optimize your overall strategy.
Analyzing sufficient conversion data is vital for spotting trends that can inform future ROAS goals. Use past performance insights to identify patterns in customer behavior and adjust your strategies accordingly. Regularly review and update your ROAS targets based on these findings to maintain campaign effectiveness.
Understanding attribution models is essential as they impact ROAS calculations and allow you to implement smart bidding strategies.
Different models allocate credit to conversion paths in varied ways, affecting how you interpret campaign performance. Choose an appropriate attribution model to ensure accurate ROI measurement and better-informed bidding decisions.
Accurate revenue tracking is essential for the success of a target ROAS campaign because it ensures that the returns measured truly reflect the ads' effectiveness. Proper tracking allows advertisers to optimize bids and strategies, leading to better allocation of advertising budgets and improved campaign performance.
To set up conversion tracking effectively in Google Ads:
Common mistakes in revenue tracking include inaccurate tracking codes, incomplete data integration, and neglecting cross-device and cross-platform behaviors.
Avoid these by conducting regular audits, using comprehensive tracking methods, and continually refining the tracking process to adapt to changes in consumer behavior.
Although there are a lot of nuances when it comes to setting a target ROAS in Google Ads, it’s a valuable tool for businesses looking to generate a specific return on their ad spend. Depending on your business objectives, it's a great idea to dive into different bidding strategies, leaning on Google's automation to drive your efforts.
No matter your next move – great bidding strategies always start with great data. Track, measure, and optimize your ad performance in real time with Triple Whale, the smarter way for brands to understand and grow with confidence. Book a demo today.
Body Copy: The following benchmarks compare advertising metrics from April 1-17 to the previous period. Considering President Trump first unveiled his tariffs on April 2, the timing corresponds with potential changes in advertising behavior among ecommerce brands (though it isn’t necessarily correlated).
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