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ROI (return on investment)

ROI is the profit from an investment divided by its cost. Unlike ROAS, it is a profit measure, so it can be negative.

Stock photos and example labels, not customers.

Definition

ROI is the profit from an investment divided by its cost. Unlike ROAS, it is a profit measure, so it can be negative.

FormulaROI = (profit - cost) / cost

Example with made-up numbers: Ads cost 1,000 and bring 1,400 of margin. ROI = (1,400 - 1,000) / 1,000 = 40 percent.

How to use it

ROI needs the same costs on both sides: if you count product cost in the profit, count the ad spend as the investment. Mixing revenue with spend gives ROAS, not ROI.

State the period and which costs are included, or two people will quote different ROI for the same ads.

Related terms

ROASPOASBreak-even ROAS

Go deeper

Measurement

Contribution margin for ecommerce ads

Revenue pays for nothing until the costs of the order are taken away. Contribution margin is the number that tells you how much room the ads have.

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