ROI
Return on investment
ROI (Return on Investment) is a measure of how well an investment performs. It expresses how much a company earned relative to what it put into a given activity, most often as a percentage. It helps compare whether a specific cost, campaign, or project paid off and where it makes sense to put more money.
How ROI is calculated
ROI starts from a simple idea: subtract the cost of the investment from the profit it produced, then divide the result by that cost. The number is usually shown as a percentage. A positive ROI means the investment earned more than it cost; a negative one means you lost money on it.
It is important to count all costs, not just the direct price. For a marketing campaign, costs include not only the ad budget but also people’s work, tools, and content production. Otherwise ROI comes out more optimistic than reality.
Why ROI matters
ROI is a common language for comparing different activities regardless of what they involve. It tells you where to direct money for the best effect.
- It lets you compare the efficiency of campaigns, channels, and whole projects against each other.
- It helps decide which activities to strengthen and which to scale back.
- It connects marketing with the business, because it speaks the language of profit, not just clicks or impressions.
- It makes investments measurable and defensible before management or the owner.
ROI versus ROAS and other metrics
ROI is often confused with ROAS. ROAS tracks only ad revenue relative to ad spend, whereas ROI works with actual profit and all costs. A high ROAS therefore does not necessarily mean the business is really making money.
It is also worth tracking ROI over the right time horizon. Some investments, such as SEO or brand building, return more slowly but last longer. Short-sighted evaluation can unfairly undervalue such activities.
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What counts as a good ROI?
There is no universal threshold; it varies by industry, margin, and type of investment. In general, a good ROI is one that reliably exceeds zero after all costs are counted and is also higher than your other available activities.
What is the difference between ROI and ROAS?
ROAS compares ad revenue with ad spend, while ROI works with actual profit and all costs. ROAS tells you how a specific campaign earns; ROI shows whether the investment paid off from the perspective of the company’s overall profit.
Why did my ROAS look good but the company is not earning?
Because ROAS does not count all costs, only ad spend. If you have a low margin or high costs for the product, operations, and people, the campaign generates revenue, but after deducting those costs the real ROI can be low or negative.