How to Increase ROAS on Meta [2024 Update]
As the debate around data privacy ramps up, Meta’s handling of user data remains a key focus among international lawmakers. Shifts in privacy norms and regulations, including the General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), as well as the App Tracking Transparency (ATT) feature introduced in Apple’s iOS14 have all impacted Meta’s advertising model, which in turn, creates a new set of challenges for advertisers like yourself.
More recently, in the summer of 2023, the Court of Justice of the European Union determined that Meta's reliance on "contractual necessity" or “legitimate interest” for processing EU users' personal data for behavioral advertising was not GDPR compliant. This leaves user consent as the only viable alternative for legally processing user data. Meta’s solution is to introduce a paid ad-free option for users, where their personal data won’t be processed for targeted advertising, as well as the usual free ad version that does process their data in this way.
So, how might this affect advertisers?
With stricter data privacy rules and some users potentially opting out of having their data processed for targeted advertising purposes, advertisers may experience reduced targeting capabilities.
Since data privacy regulations began impacting targeted ads, Block & Tam has been helping businesses to mitigate the issues and explore new strategies for reaching and engaging with their target audiences. We’ve condensed some of our most important findings into 8 top tips on how to increase ROAS on Meta in 2024.
What Is ROAS?
ROAS stands for return on ad spend. It’s a type of metric used by marketers to measure how much of their advertising budget was spent on a specific ad or campaign, vs how much revenue it generated.
It helps brands to understand how successful a paid ad campaign was. If they spent more money than they made, they may need to improve or discontinue the ad. If their ROAS is high, they may wish to invest more in the ad.
How to Calculate ROAS
To calculate ROAS on an advertising campaign, divide the revenue generated by the cost of the campaign.
For example, if your brand invested $1,000 dollars in an ad campaign that generated $5,000 in sales, the ROAS would be $5 — meaning that for every dollar you spent, you made $5 dollars.
What Is a Good ROAS?
ROAS can vary across industries and size of businesses. In general, if your ROAS is a positive number, then you’re making more money than you spend, which is always a good thing.
It’s important for each brand to set their own targets before the start of each campaign to define success. This way, when reviewing the ad performance, you can decide whether to switch it off altogether, make some improvements, or invest a higher budget to see even better results.
How to Increase ROAS
There are several ways to increase your ROAS, which we’ll explore in more detail below.
SET BUDGET AT THE AD SET LEVEL
While most social media platforms will push for you to select ‘Campaign Budget Optimization’ on your ad sets, this might not give you the most control over your ad spend. With ad set level budgeting, you can allocate specific amounts to different ad sets based on their performance or strategic importance.
This approach requires more of a hands-on effort compared to leaning on platform automations, but it provides a better opportunity for you to scale ROAS while managing frequencies.
FOCUS ON BROAD TARGETING
Over the past 4 years, we have done significant audience testing and learning to help identify audiences that drive the strongest conversion rates and return on ad spend for our clients. Across the board, Broad targeting has been the strongest performing audience.
Years ago, Meta did very well with narrow, interest, or demographic-based targeting. Today, though, Meta has enhanced their algorithm to be able to successfully identify users most likely to convert when the targeting parameters are as broad as possible. Our approach was and always will be testing and learning to ensure we garner the most success for our clients. This means that while we will always recommend including a Broad audience to test, we will always do so alongside other audiences and let the data inform our path forward.
RUN ADVANTAGE+ SHOPPING CAMPAIGNS
Advantage+ Shopping Campaigns continues to be a driver of success in 2024. Designed to be the most efficient solution for performance-focused advertisers looking to drive online sales, Advantage+ Shopping Campaigns leverage Broad targeting (though you can also include retargeting audiences) and machine learning to identify and aim for your highest-value customers.
The primary benefit of this campaign type is the ability to have 5 copy and 5 headline options within each ad. The algorithm works behind the scenes to mix and match the approved copy and headline options to deliver the highest-performing ad variation to the target audience.
We recommend layering this campaign type into your conversion strategies to leverage the powerful algorithm—though do expect higher costs. If your product offering has a wide range of price points, consider testing out the newest iteration of the campaign type, ASC Value that will help increase AOV and in return garner a lift in ROAS.
BE CREATIVE WITH DYNAMIC AD TYPES
Using your product feed with dynamic ad types can significantly enhance ad relevance and engagement. Dynamic creatives such as DPAs, DABAs, or Dynamic Carousels automatically personalize ad content to individuals based on user data, showing them the products that they’re more likely to engage with and driving higher conversion rates.
INTEGRATE CRM & CAPI
The use of CRM lists in addition to pixel-based audiences helps to capture as many relevant users as possible. The integration of Conversions API (CAPI) is an integral part of the success of performance-based marketing on Meta. The Conversions API is designed to create a direct connection between your marketing data and the systems that help optimize ad targeting. This data helps enable ad personalization, optimization, and measurement across Meta technologies so that your ads are shown to people who are more likely to find them relevant, resulting in a decreased cost per result.
LEVERAGE UTM TAGGING
When using a third-party reporting tool to measure Facebook success, having proper UTM tagging is imperative in order to have a complete view of performance. Having a standardized source / medium across a single platform, while also capturing campaign, audience and creative level-data ensures that you will have complete performance insights to help inform optimizations and management.
Signal loss is a significant challenge for online advertising on Meta as a result of iOS 14 and ever-changing data privacy regulations. Block & Tam have designed a series of solutions that might be able to help your business overcome this challenge - get in touch and have an introductory call with our team.
INVEST IN THE UPPER FUNNEL
Focusing on the upper funnel means investing more of your marketing efforts on awareness and reach—getting your brand in front of as large of an audience as possible. While this doesn’t directly contribute to ROAS targets, it does create a larger pool of potential customers to retarget later on in the lower funnel, increasing your chances of conversions in the long run.
Display ads and video ads are good examples of top-of-the-funnel marketing. Both of these ads aren’t necessarily going to drive clicks and sales, but they put your brand, product, or offers in front of a large audience. Display ads may just be sat on a website that a user is browsing, while a video ad may appear while they’re watching another video, on YouTube for instance.
Increase Your ROAS With Block & Tam
Get in touch with the experts at Block & Tam who can continue to increase your ROAS even during the rapid changes in data privacy regulations.
