What is ROI (Return on Investment)?
Master the most important metric in advertising - learn how to calculate and maximize your return on investment.
ROI Definition
ROI (Return on Investment) is a financial metric that measures the profitability of your advertising campaigns by comparing the revenue generated to the total amount invested. It's expressed as a percentage and tells you how much profit you're making for every dollar spent on advertising.
ROI is the most important metric for determining whether your advertising efforts are successful. Unlike metrics like clicks or impressions, ROI directly ties your marketing spend to business outcomes, showing you the actual financial impact of your campaigns. A positive ROI means your campaigns are profitable, while a negative ROI indicates you're losing money.
Why ROI Matters
Measures Profitability
Shows exactly how much profit you're making from your advertising investment.
Guides Budget Decisions
Helps you allocate budgets to campaigns that deliver the best returns.
Justifies Marketing Spend
Provides clear evidence of marketing's contribution to business growth.
Enables Comparison
Allows you to compare performance across different channels and campaigns.
How to Calculate ROI
Example Calculation
If you spend $1,000 on advertising and generate $3,000 in revenue:
This means you earned $2 in profit for every $1 spent, representing a 200% return on investment. Higher ROI percentages indicate more profitable campaigns.
Types of ROI Measurements
Campaign ROI
Measures profitability of individual advertising campaigns.
Channel ROI
Compares returns across different advertising channels and platforms.
Short-term ROI
Immediate returns from advertising within days or weeks.
Lifetime ROI
Total returns including repeat purchases and customer lifetime value.
Product ROI
Returns on advertising spend for specific products or services.
Customer ROI
Returns from acquiring specific customer segments or demographics.
ROI Benchmarks by Industry
