This story originally appeared on the MAF blog.
You might have heard that the leading mobile game studios are changing their approach to user acquisition.
Many of them are no longer fixated on CPI (cost per install) as the primary metric. Instead, more and more app and game marketers are focusing on another metric — ROAS.
In light of this shift, the leading ad networks have included ROAS optimization in their campaign options. In this article, we’ll go over everything you need to know about this campaign type, from its benefits to how it works.
But first, let’s set the basics straight.
What is ROAS?
ROAS (return on ad spend) is a revenue KPI that measures the effectiveness of app campaigns. It tells app advertisers how much revenue they generate for each dollar spent on advertising.
In other words, it shows how valuable the acquired users are.
Naturally, the higher the ROAS, the better.
The formula for calculating ROAS is simple: divide the ad campaign revenue by its costs and multiply by 100.
Let’s say an ad campaign brought in $4,000 after spending $1,000 on ads. That’s a $3,000 profit or a 300% ROAS. For every dollar spent on the campaign, the advertiser earned $3 in revenue.
App marketers usually measure ROAS for different timeframes. For example, day 3 ROAS, day 7 ROAS, day 14 ROAS, day 30 ROAS, etc. Each of these data points helps them understand their user behavior and value over time.
What is a Good ROAS?
While many advertisers wonder about this, there is no definitive answer to this question.
A good ROAS depends on different factors including the app or game category, its monetization strategy, target audience, etc.
For instance, hybrid-casual idle games usually aim to attract high-value players, get high retention rates, and, ideally, achieve a ROAS of over 100%.
A good example is Midnite Games which struggled to reach this goal for their game Survivor Idle Run through traditional ad networks like Facebook and Google. However, once they incorporated MyChips into their UA strategy, they achieved a 170% global ROAS, which is 71% higher than that through standard video ad networks.
While there’s no universal standard for a good ROAS, success stories like this one show there is always room for improvement. If the studio settled for the ROAS from traditional ad networks, they wouldn’t have discovered a more profitable channel.
From CPI to ROAS
Up until recently, CPI was the “holy grail” of user acquisition.
In other words, most app and game marketers were focused on acquiring as many users with the lowest possible CPI.
But this is no longer the case.
The reasons? Oversaturated ad networks, inflation, rising CPIs, and privacy changes.
All of these factors made marketers rethink their old approach to user acquisition and consider new strategies beyond CPI optimization. The strategy that gained the most traction is to focus on metrics that reflect user quality, such as ROAS.
In a recent interview, Jatin Mittal, the Head of UA at TapNation shared his thoughts about this shift: “From our experience, focusing only on achieving a low CPI often results in acquiring users who might meet the CPI target but don’t contribute significantly to the game’s profitability. And in today’s competitive UA landscape — this is quite an issue. Instead of being fixated on a specific CPI amount, it’s better to focus on achieving consistent retention and ROAS over time.”
About ROAS Optimization
Now that you’re familiar with the ROAS definition and what made it so popular, let’s talk about how you can optimize for this metric.
Types of ROAS Optimization
ROAS optimization is the process of maximizing the return on ad spend in UA campaigns. There are two main ways to do it:
- Optimizing for ROAS in a regular campaign setup. To optimize for ROAS in any type of app campaign, marketers track different performance metrics and optimize targeting, bids, ad creatives, and other parameters.
- Leveraging ROAS campaigns. Type of campaign designed to maximize return on ad spend by setting a specific ROAS goal. These campaigns automatically adjust bids and ad placements to make sure the ads reach the most valuable users.
While most app and game marketers are familiar with the first approach, the second one is relatively new.
It has gained popularity in the last couple of years when ad networks like Facebook Audience Network, Google Ads, Apple Search Ads, and others introduced ROAS optimization as a campaign type.
Finally, note that most leading ad networks support ROAS optimization for both ad revenue and IAPs. In some of them, they appear as separate campaigns, while others unify total app revenue.
Benefits of ROAS Optimization in UA
Whether you go for option 1 or 2, one thing is certain — ROAS optimization is a clever strategy with a long list of advantages.
Here are just some of them:
- Profitability indicator. The main goal of ROAS optimization is to ensure that UA campaigns are profitable. This is achieved by targeting and displaying ads to those users who are most likely to interact with them.
- Better conversion rates. By focusing on ROAS, advertisers serve ads to users who are more likely to convert.
- High-quality users. ROAS optimization prioritizes high-quality users who will bring long-term value to the app. These users are not only more likely to make IAPs but also have higher retention and engagement rates.
- Improved ad experiences. ROAS-focused campaigns are less likely to serve users irrelevant or intrusive ads, which can lead to a better ad experience.
- Ad budget allocation. With ROAS data, you can allocate your budget strategically and make sure that your ad spend is directed towards your most profitable channels.
ROAS Campaigns Overview
As we mentioned earlier, ROAS campaigns are a relatively new option on ad networks.
So, you might be curious about how they work exactly.
To help you gain a clear understanding of these campaigns, let’s outline the main steps of the process.
1. Collecting Data
When advertisers first start using an ad network, they can’t immediately launch a ROAS campaign.
This is because first, the ad network needs to collect enough data on app users.
In this phase, the ad network gathers information on user behavior, preferences, engagement patterns, and in-app activities. This is basically a training phase where the algorithm used for machine learning absorbs conversion data.
Based on this data, the ad network can identify users who are most likely to interact with ads and continue using the app beyond the install.
2. Setting the Target ROAS
Once the ad network has the data it needs, you can get started with ROAS campaigns.
In this process, you’ll need to set a target ROAS.
The target ROAS is the foundation of ROAS campaigns, informing the ad network about the return you expect from your ad spend. The ad network then uses this target to optimize ad placements and bids to achieve the desired ROAS.
It’s very important to do this properly.
To set the target ROAS appropriately, take into account your app’s historical ROAS performance and your LTVs. Generally, the target ROAS should be close to the actual ROAS of your app.
It’s also recommended to tailor the target ROAS for different countries. For example, it’s a good idea to aim higher in markets like the US because this campaign type has proven most effective there.
However, avoid setting an overly ambitious target ROAS.
While it might be tempting to shoot for the stars in these markets, this won’t get you anywhere.
Aiming too high with your target ROAS will most likely limit your campaigns’ reach and won’t yield the desired results.
3. Performance Tracking and Optimization
As long as ROAS campaigns remain active, the optimization process continues.
To achieve a maximum ROAS, these campaigns continuously collect data, adjust targeting, and optimize ad placements. Throughout this process, the machine learning algorithm keeps refining itself, focusing on getting high-quality users to meet the desired ROAS target.
The result? Mature data and stable campaign performance.
What Does the Future Hold for ROAS Optimization?
As we mentioned before, ROAS optimization heavily relies on machine learning and AI.
Since we live in a world where these technologies advance rapidly, we can expect further enhancements in ROAS optimization as well. For example, more sophisticated targeting and personalized ad experiences.
We also expect even more advertisers to optimize for ROAS.
Today, app and game businesses are diversifying their UA strategies. They advertise on different channels and run various campaign types. For example, they run ROAS campaigns parallel to CPI campaigns and offerwall campaigns.
In this kind of setup, ROAS is an important metric to track across channels and campaigns, because it shows how effective each of them is in driving high-value users.
ROAS Optimization Wrap-Up
All in all, it’s safe to say ROAS optimization is currently one of the hottest UA strategies among app and game advertisers.
In today’s market, the focus is on profitability and user quality — and ROAS is the ideal metric to track and optimize for both. Whether you decide on classic optimization or ROAS campaigns, you’re in the right place to reach quality users.
If you need some help along the way, we’d be happy to help. At MAF, we specialize in ROAS-optimized campaigns and targeting high-value users. Contact us for more information!
