ROI vs ROAS and the difference between Profit & Growth

In the case of digital marketing, the ROI and ROAS are two different metrics and often used to denote the effectiveness of any marketing campaign, But, if you want to understand how your campaigning is performing. You need to know the meaning and their differences. In this article, you will get the basic knowledge about what are ROI and ROAS and how profit and growth are different from each other.

What Is ROAS?

ROAS stands for Return on Ad Spent. It is used to calculate and determine how much product is the investment in the advertisement. In simple words, ROAS calculates how the advertisement campaigning of a brand is performing and is the investment fruitful or not.

It may seem a little confusing, but the ROAS is a pretty simple concept and the formula to calculate ROAS is also really simple. To know this, you need to have explicit knowledge about the expenditure and your earning.

The FORMULA of ROAS is:

ROAS = Conversion Value from Ad Campaign / Cost of Ad Campaign

Here the conversion Value indicates the revenue generated by a brand after a particular advertisement campaign. So, your ROAS effectively determines your income concerning the amount spent on the advertisement campaigns.

What Is ROI?

ROI or the return of Investment is a type of performance measurement. With ROI procedure, you can evaluate id a particular investment is efficient of not. ROI is a direct method that directly ties to analyze the amount of return made from a specific type of investment. If you want to calculate ROI, you need to calculate the return for a particular investment and the cost of that investment.

The FORMULA of ROI is:

ROI = (Current value of Investment – Cost of Investment) / Cost of Investment 

In this case, the current value of the investment is the money obtained from the sell or business after the promotional campaign was executed.

Determining a Good ROAS and ROI of Digital Marketing Campaign

Even if ROI and ROAS may look the same, they are a lot different. ROAS is a ration that checks the effectiveness of a campaign with direct earning and expenditures. On the other hand, ROI checks the amount a brand makes after eliminating the expenses.

ROI only checks if a campaign is efficient for sale and also calculates the loss, but ROAS cannot calculate the loss or profit, although it can indicate your loss or gain.

If you want to determine Good ROI and ROAS for specific digital marketing, the procedure is pretty simple. The calculation depends on the investment and the revenue earned. But, if you want to obtain for the good ROI and ROAS, connecting to an expert digital marketing agency is the best idea.

• Published on
• 24/07/2020
• By
• Brands Martini


• Categories: ROI vs ROAS