ROI, ROAS and how they differ
ROAS is revenue per dollar of ads
Revenue divided by spend. Spent 20,000, got 90,000 – ROAS is 4.5×. The number is simple, and that is why it misleads: it knows nothing about cost of goods. A shop with a 20% margin barely breaks even at 4.5× ROAS, while a service with a 90% margin makes money at the same ROAS.
ROI is profit per dollar of ads
The same comparison, but from profit: cost of goods is taken from revenue, then ad spend, and the result is divided by spend. ROI of 100% means the campaign paid back what went in and the same again on top. ROI of 0% means breaking even. A negative ROI means the campaign cost more than it brought.
If you leave the margin empty, the calculator compares spend with all of the revenue. That is honest ROAS as a percent, but it is not profit.
Break-even ROAS
A hundred divided by the margin. With a 25% margin a campaign breaks even at 4× ROAS: every dollar of ads has to bring four dollars of revenue to cover cost of goods and the ads themselves. This is the number to keep in mind when you set bids: anything lower is a loss, even while sales keep coming.
ACoS – the ad share of revenue
Spend divided by revenue. The flip side of ROAS, only as a percent: 4× ROAS is 25% ACoS. Handy when the goal is set as "ads take no more than 15% of sales".
What is not included
Fixed costs: salaries, rent, running the website. This is the ROI of the ads, not of the business. Returns and delayed purchases are not here either – you enter the revenue yourself, so you decide the period and what goes into it.
Common questions about ad ROI
What goes into "Revenue" if some orders are not paid yet?
What is already paid. Unpaid orders make ROI look better than it is, and the campaign looks profitable right up to the day of the returns.
Where do I get the margin?
Price minus cost of goods, divided by price. For a shop that is the purchase price and delivery, for a service it is the time of the person doing the work. If you have no exact figure, take the lower estimate: an inflated margin turns a losing campaign into a winning one only inside the calculator.
Is 100% ROI good?
It means the campaign doubled what went in, counting the margin. Whether that is good depends on the other options: if the same budget brings 300% in another channel, then 100% is money lost, not a success.
Why is ROI negative while ROAS is above one?
Because ROAS counts revenue and ROI counts profit. At 2× ROAS and a 30% margin, every dollar of ads brings back 60 cents of profit: there is revenue, but no money.
Can I compare the ROI of two channels?
Yes, if both use the same margin and the same period. The most common mistake is taking revenue for a quarter and spend for a month.
What if revenue is zero?
Look at the funnel, not at ROI. ROI here is always −100% and explains nothing: the problem is either the traffic or the page, and the calculator knows nothing about either.