In digital marketing and advertising, two key metrics – Return on Ad Spend (ROAS) and Return on Investment (ROI) – play important roles in evaluating how well campaigns and strategies work.
What is ROAS?
ROAS specifically looks at how advertising campaigns perform. It measures the revenue made compared to how much was spent on ads. ROAS is shown as a percentage or multiple of ad spend, showing how much money is earned for each dollar put into advertising and
What is ROI?
ROI is a broader financial measure that includes all the costs and income related to an investment, not just advertising costs. It evaluates the overall profitability of an investment accounting for all expenses and revenue, including from ads.
The Difference Between ROI and ROAS
The main difference between ROI and ROAS is their scope and what they take into account. ROI provides a big picture view of profitability by including all costs and returns.
How to Improve Your ROAS and ROI?
How can you improve ROAS and ROI? To increase ROAS, optimize your ad campaigns – target the right people, use compelling creative refine keywords, and keep adjusting your ad spend to maximize revenue. For better ROI, look at the full picture. Consider all costs and income sources when making investment decisions.
How ROAS is calculated – if you spend $1000 on ads and make $3000 in revenue, your ROAS is 3x or 300%. So you earned three times what you put into ads.
If you invest $10000 total in your business, including ad costs, and you make $15,000 total your ROI is 50%. So you made 50% profit overall on your investment.
Should you use ROI or ROAS?
Depends if you want to look at just your ad results (ROAS) or your whole business profit (ROI).
How do you figure out ROI from ROAS?
ROI includes all costs and revenue, not just ads. Subtract total costs from total revenue, then divide by total costs.
When do you use ROI vs ROAS?
Use ROI to see overall investment profit. Use ROAS to look at ad campaign performance specifically.
So in summary ROI is broader while ROAS focuses on ad results and you use one vs the other depending on what you want to measure.