ROI vs ROAS
ROI measures overall return relative to total investment across a business activity, while ROAS isolates return specifically from ad spend. Confusing the two makes a marketing channel look more or less profitable than it actually is.
ROI
A financial metric used to evaluate the efficiency or profitability of an investment relative to its cost. It is the ratio of net profit to investment cost, expressed as a percentage.
ROAS
A metric that measures the amount of revenue your business earns for every dollar spent on advertising. It is calculated by dividing gross revenue from a campaign by its total cost.
Net profit as a percentage of total investment
Revenue generated per dollar of ad spend
(Net Profit / Cost) x 100
Revenue from Ads / Ad Spend
Yes, includes all costs
No, ad spend only
Judging whether an initiative is profitable overall
Judging whether a specific ad campaign is efficient
| What it measures | Net profit as a percentage of total investment | Revenue generated per dollar of ad spend |
|---|---|---|
| Formula | (Net Profit / Cost) x 100 | Revenue from Ads / Ad Spend |
| Accounts for costs beyond ads | Yes, includes all costs | No, ad spend only |
| Best used for | Judging whether an initiative is profitable overall | Judging whether a specific ad campaign is efficient |