Return On Ad Spend (ROAS) is something all marketers should be tracking for paid acquisition. For each $1000 on ads I spend, how much money does that make me?
Shopify app developers can buy ad slots at the top of search results, bidding on keywords. There are basic reports and a dashboard available in the Shopify Partner admin. We even have a Partner API. However, none of this shows how much revenue an app store ad brings us.
We can add Google Analytics tracking onto our app listing, and we have query parameters to show a listing view came from an ad. You’d think you’d be able to use the same Google Analytics property to track from within your app, firing an event when the merchant pays for your app. Unfortunately not! Shopify hasn’t enabled cross-domain tracking, meaning a user viewing the app listing is not tracked as the same user when they land on your app.
This issue comes up time and time again from app devs. Together we’ve petitioned Shopify to give us a way to track ROAS for app store ads, to no avail (as of yet… I think it’s bound to come when ad spend is a meaningful revenue stream for them).
One lo-fi way to calculate something like ROAS
There is one way that you can make sure you’re getting some kind of return on your ad spend. It’s not pretty, and it is super lo-fi, but it is the best we have.
With Google Analytics tracking in place and the add app goal set up, we can use the search_ad surface parameter to filter our app listing views. Then, see how many of these complete the add app goal. That gives us the number of installs for search ads. A similar number is in your partner dashboard.
A SaaS metric you should be tracking is lifetime value (LTV): how much revenue do I expect from a user when they start paying. Let’s say your app costs $10/month and they keep in installed on average for ten months. Your LTV will be $100.
With Shopify apps installed from the app store, not everyone who pushes the ‘add app’ button on your app listing will approve your app permissions and the app charge. This conversion rate is essential to know for our ROAS calculation. Let’s say 80% of merchants who push the ‘add app’ button approve permissions and start a free trial.
Then a percentage of your free trials will convert to paid. Let’s say yours is at 60%.
We now have everything we need to apply averages to our ads funnel to see how much revenue we think our ads generate vs how much they cost to run.
Putting it all together, let’s say we spent $1000 last month to drive 100 installs. We apply our averages to those 100 installs to work out roughly how much revenue they’ll generate. Of those 100, 80% approve the permissions and charge: 80 merchants. 60% of those 80 complete the free trial and start paying: 48. Our average LTV is $100, so those 48 merchants will generate $4,800 in revenue for us.
Our lo-fi ROAS calculation is that the $1000 spend last month will return $4,800 in revenue. Nice! While this is not genuinely measuring these individual merchants through the funnel, we now know roughly how well our Shopify app store ads perform.