ROAS vs ROI: What’s the Difference
If ROAS is your car’s MPG, ROI is your monthly budget. ROAS tells you how efficiently ad dollars turn into revenue; ROI tells you if the business actually makes money after all costs. This strategy guide clarifies the difference, when to use each, how to present them to stakeholders, and how to avoid the most common mistakes that sink otherwise “good” campaigns.
1) What is ROAS?
ROAS (Return on Ad Spend) measures revenue generated per dollar of ad spend.
Formula: ROAS = Revenue ÷ Ad Spend
Example: Spend $1,000 → revenue $4,000 → ROAS = 4.0x.
2) What is ROI?
ROI (Return on Investment) measures profit relative to total costs (not just ad spend): product costs, shipping, payment fees, agency or payroll, and more.
Formula: ROI = (Revenue − Total Costs) ÷ Total Costs
Example: Revenue $4,000 − total costs $2,500 = profit $1,500 → ROI = 60%.
3) ROAS vs ROI: Key differences
| Metric | Focus | Best for | Risk if used alone |
|---|---|---|---|
| ROAS | Ad efficiency | Daily optimization, cross-campaign comparisons | Looks “great” even if margins are thin |
| ROI | Overall profitability | Budgeting, pricing, scale decisions | Too slow for daily tactics; can hide channel-level wins |
Both matter. ROAS helps you steer; ROI tells you if the trip is worth taking.
4) Signals that you’re reading metrics wrong
- High ROAS, low cash: Product costs or returns are eating margin—check ROI.
- Low ROAS, growing profit: Average order value (AOV) rose or LTV improved—check blended ROI.
- Great ROAS, stuck revenue: You’re starving demand at the top; expand reach even if ROAS dips.
- Good ROI, slow learnings: You’re under-testing creative; ROAS will stagnate without new angles.
5) What to show your CMO vs CFO
For the CMO (growth lens)
- ROAS by campaign/ad set with trend lines (7/28 days).
- CTR, CPC, CPA to explain the “why” behind ROAS changes.
- Creative cohorts (UGC vs comparison vs testimonial) vs ROAS.
For the CFO (profit lens)
- Blended ROI including product and fulfillment costs.
- Payback period and contribution margin by channel.
- Sensitivity table: AOV and cost swings vs ROI thresholds.
6) How benchmarks fit (and when they mislead)
Benchmarks are helpful ranges, not targets. Context—industry margins, funnel stage, country, offer—matters more than any one number.
- Prospecting ROAS often healthy at 1.5–3.0x; remarketing ROAS can be 3–6x.
- ROI goals vary widely; many profitable accounts target 20–50%+ at steady state.
Use benchmarks to sanity-check, then build your own rolling 30/60/90-day baseline.
7) A simple decision framework
- Diagnose with ROAS (efficiency) + CTR/CPC/CPA drivers.
- Qualify with ROI (profit) and payback period.
- Decide budgets by channel using both: scale winners even if ROAS dips slightly, if ROI stays healthy.
- Document learnings weekly so strategy improves faster than competitors.
Track Efficiency & Profit—Side by Side
Use the free ROI Calculator for profit and margin, and the SignalLift Dashboard for daily ROAS, CTR, CPC, and CPA—no heavy setup.
Free ROI Calculator Get the DashboardFAQ: ROAS vs ROI
Which metric should I optimize for first?
Start with ROAS to allocate spend efficiently, then confirm with ROI so you don’t scale unprofitable volume. Use both every week.
What is a “good” ROAS or ROI?
Many accounts see 1.5–3.0x ROAS in prospecting and 3–6x in remarketing. Sustainable ROI often lands at 20–50%+, but it depends on margins and AOV.
Why did ROAS drop after I increased budget?
Reach expands into colder audiences. If ROI and revenue still grow, the tradeoff can be healthy. Protect profit with price/offer and landing-page conversion.
Do I need CPM to make decisions?
No. Focus on ROAS, CTR, CPC, and CPA for efficiency; use ROI for profit. CPM can be interesting but isn’t required for most decisions.
