Incipia blog

Calculating True Mobile Marketing ROAS Using Cohort Analysis

Gabe Kwakyi | February 2, 2017

Are you having difficulty getting a true picture of how effective your advertising budget is being deployed?

Watch this video to see how you can use weekly (or monthly) cohort analysis to figure out your true ROAS (Return On Ad Spend). ROAS is one retroactive way to calculate ROI (another popular, but more complex method is LTV analysis) by determining how much revenue you earn in return for every dollar you spend, calculated = revenue / cost. For instance, if you spent $10 and earned $5 in revenue from those users acquired, your ROAS would = 50%. As a ratio, ROAS enables you to compare the performance of any campaign, even if the total cost or revenue from any campaign is significantly higher or lower.

For instance, if you spent $10 and earned $5 in revenue from those users acquired with your $10, your ROAS would = 50%. As a ratio, ROAS enables you to compare the performance of any campaign, even if the total cost or revenue from any campaign is significantly higher or lower.

To uncover your true ROAS, however it is necessary to use cohort analysis in order to factor only for revenue generated from one cohort of acquired users. This is because, if you looked at all revenue generated from one week, you would see revenue generated from any users who spent money during that week, regardless of whether they were acquired from that particular week or from prior weeks, which could lead to an inflated ROAS number (because revenue was recorded for users, but not the cost to acquire them). Using cohort analysis narrows your calculation to only revenue generated from users who you spent money to acquire during a particular week, giving you a true picture of ROAS.

 

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Incipia is a mobile app development and marketing agency that builds and markets apps for companies, with a specialty in high-quality, stable app development and keyword-based marketing strategy, such as App Store Optimization and Apple Search Ads. For post topics, feedback or business inquiries please contact us, or send an inquiry to hello@incipia.co.