• Return On Ad Spend (ROAS) is a marketing metric that indicates the efficiency of a digital marketing campaign.
• To calculate ROAS, divide the revenue from an advertising campaign by the cost of that campaign.
• A higher ROAS indicates a more effective advertising campaign, but the exact figure depends on the industry.
• Factors affecting ROAS in real estate include target audience, ad platform, and property type.
• Improving ROAS involves optimizing ad content, targeting, and conversion strategies.

ROAS is a key business tool, especially in competitive fields like real estate. It simply answers the question: for every dollar you spend on ads, how much do you earn back?

By dividing the revenue from ads by the cost of the ads, you can determine your return on ad spend:

ROAS = Revenue Generated from Ads / Cost of Ads

ROAS is important because this metric lets you see which ads work best. This helps you spend your money wisely and focus on campaigns that bring in more cash.

Return on ad spend also helps prove your marketing’s worth to clients by turning plans into clear results they can see. By tracking ROAS, you learn what your customers respond to, eventually letting you make better, more effective ads.

A good ROAS can vary depending on the industry, business model, and specific company goals. In general, a ROAS of 1:1 or 100% means you’re breaking even, meaning you’re earning $1 for every $1 spent on advertising. In other words, the higher the ROAS, the better it is.

For example, most local businesses aim for a ROAS of at least 2:1 (or 200%), or $2 for every $1 spent on ads. Meanwhile, e-commerce businesses want a healthy ROAS of 4:1, and B2B businesses up to 6:1.

In real estate, where transactions are high-value but infrequent, a higher ROAS might be expected to account for longer sales cycles and higher customer acquisition costs.

It’s important to note that:

• What’s considered a “good” ROAS can differ based on factors like profit margins, business goals, and overall marketing strategy.
• Some campaigns might have lower ROAS but serve other purposes, such as brand awareness.
• Consider ROAS alongside other metrics for a comprehensive view of marketing performance.

ROAS in Real Estate

Determining ROAS in real estate can be more complex due to the nature of the business.

One reason is that real estate transactions often take longer to close (and even longer to see actual profit) than other industries, so you may need to track ROAS over extended periods to see the full impact of your advertising. This also means it’s difficult to correctly attribute the sale to a specific ad, which you could have launched months ago.

In addition, since buyers often interact with various marketing channels before making a decision, it’s tougher to isolate the impact of a single ad. This is why you need a specialized ad attribution model to determine revenue from specific ad campaigns, such as using unique links, phone numbers, or asking leads how they found your listing.

Note that while some ads might not directly lead to a sale, they can increase brand awareness or website traffic. These benefits are valuable but harder to quantify in ROAS calculations.

Finally, for real estate agents and brokers who usually take a “cut” from the sale, you may need to account for your specific commission structure to calculate ROAS.

Several factors can influence your ROAS in real estate marketing:

Target Audience

The effectiveness of your advertising largely depends on reaching the right audience. In real estate, this could mean targeting demographic groups like first-time home buyers, developers, retirees, etc. Each group may respond differently to various ad formats and platforms, affecting your ROAS.

For instance, first-time homebuyers are more active on social media, while commercial investors might be better reached through LinkedIn or industry-specific publications.

Ad Platform

Different advertising platforms can yield varying ROAS due to their unique characteristics.

• Social media: These platforms offer detailed targeting options and are often cost-effective for reaching a broad audience. You can segment social media demographics further, such as by age. For example, if you are selling to older people (40 to 60 years old), Facebook would be your best bet.
• Google Ads: Search ads can capture high-intent leads actively looking for properties, potentially leading to higher ROAS.
• Print media: While traditional, print ads in local publications can still be effective for certain demographics or luxury markets.
• Real estate marketplaces: Platforms like Zillow and Redfin target users specifically interested in real estate, but listings on these marketplaces may have higher advertising costs.

Property Type and Market Conditions

The type of property you’re advertising, and current market conditions can also impact your ROAS.

High-end properties are a prime example. While these may require a higher ad spend, the potential profit from a single sale can result in a high ROAS. Alternatively, a seller’s market may also have a higher return on ad spend because you need to advertise less in these markets to close a deal.

Market conditions like seasonal trends may also affect ROAS figures.

Ad Quality and Relevance

The quality and relevance of your ads play a crucial role in determining ROAS. High-quality, relevant ads attract more potential clients and lead to better engagement and conversion rates, ultimately improving your ROAS.

Here are the key elements:

• High-quality visuals (professional photos, virtual tours)—for instance, real estate listings with pictures taken by drones are 68% more likely to sell.
• Compelling ad copy that highlights unique selling points.
• Clear call-to-action (CTA) that encourages engagement.
• Relevant keywords and targeting to reach the right audience.
• Social proof, i.e., testimonials or reviews.

RELATED: SEO For Real Estate Investors Part 1: Inbound Motivated Seller Leads

Conversion Rate Optimization

Conversion Rate Optimization (CRO) aims to increase the percentage of ad viewers who take the desired actions (e.g., buying a product, signing up for a newsletter, etc.). CRO assumes that you have already generated leads and want to take them further through your sales funnel.

This includes fast response times to inquiries, enhanced follow-up methods, and personalized communication, but may also include streamlining processes like using customer relationship management (CRM) software or expanding your team to handle incoming leads.

By analyzing your conversion funnel regularly, you can get insight into what works and what doesn’t. This allows you to refine your CRO strategy to increase your return on ad spend and ultimately close more deals.

How do you optimize return on ad spend in real estate marketing?

Here are some actionable strategies to improve the efficiency of real estate advertising investments:

• Targeted audience selection: Focus on reaching the most qualified leads based on demographics, interests, and location.
• A/B testing: Experiment with different ad creatives, messaging, and CTAs to identify the most effective combinations.
• Tracking and analysis: Monitor key metrics like cost-per-lead, conversion rates, and customer lifetime value to identify areas for improvement.
• Budget allocation: Shift ad spending toward the highest-performing campaigns and channels.
• Continuous optimization: Regularly review and adjust your marketing strategy based on performance data.

How does ROAS differ from ROI in real estate marketing?

While both ROAS and ROI (return on investment) measure the effectiveness of your marketing efforts, they differ in scope and calculation. ROAS focuses specifically on advertising spend and the revenue directly attributed to those ads. ROI, on the other hand, takes into account all investments (not just advertising) and all profits (not just revenue).

For real estate professionals, ROAS is often more useful for evaluating and optimizing specific ad campaigns, while ROI provides a broader view of overall marketing and business performance.

How often should I calculate and review my ROAS?

Review return on ad spend regularly to ensure your advertising efforts remain effective.

For many businesses, conducting a monthly analysis across different campaigns and platforms is generally good practice. This allows you to make informed decisions about budget allocation and strategy adjustments.

For real estate, which has longer sales cycles, quarterly deep dives and annual assessments might be more useful. Take a comprehensive look at your ROAS in the context of broader business goals, market trends, and your own historical data. Use this time to plan major strategy shifts if needed.

Additionally, consider reviewing ROAS more frequently during peak seasons or when testing new ad strategies. The key is to find a balance between staying responsive to short-term changes and maintaining a focus on long-term performance.

1. WolfPack Advising. “What Is a Good Return on Ad Spend (ROAS)?” https://outvio.com/blog/what-is-roas/
2. AdRoll, “Brand Awareness Performance and Optimizations.” https://help.adroll.com/hc/en-us/articles/360054187891-Brand-Awareness-Performance-and-Optimizations
3. Luxury Presence, ​​”Proven Real Estate Social Media Marketing Strategies for 2024.” luxurypresence.com/blogs/real-estate-social-media-marketing/
4. Sprout Social, “Social media demographics to inform your 2024 strategy.” sproutsocial.com/insights/new-social-media-demographics/
5. National Association of Realtors, “Drones.” https://www.nar.realtor/drones
6. HubSpot Blog, “Conversion Rate Optimization (CRO): 8 Ways To Get Started.” https://blog.hubspot.com/marketing/conversion-rate-optimization-guide
7. Instapage, “How to Maximize ROAS with Social Ad A/B Testing.” instapage.com/blog/how-to-maximize-roas-with-social-ad-a-b-testing/