ROAS vs ROI: What’s the Difference
Marketers often confuse ROAS and ROI, but they measure very different things. This guide breaks down the difference, shows when to use each, and explains why both matter in ad reporting.
1) What is ROAS?
ROAS (Return on Ad Spend) shows how much revenue your ads generate for every dollar spent. The formula is simple:
ROAS = Revenue ÷ Ad Spend
Example: If you spend $1,000 on ads and generate $4,000 in revenue, your ROAS is 4.0. That means every dollar produced four dollars in return.
2) What is ROI?
ROI (Return on Investment) measures the profit generated compared to the total cost of the investment. The formula is:
ROI = (Revenue – Cost) ÷ Cost
Example: If revenue is $4,000 and total costs (ads, product, overhead) are $2,500, profit is $1,500. ROI is $1,500 ÷ $2,500 = 60%.
3) ROAS vs ROI: The Key Differences
- ROAS only considers ad spend and revenue.
- ROI includes all costs, showing profit margin.
- Use ROAS for campaign efficiency and ROI for overall profitability.
Free ROI Calculator Template
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Download Free Template4) When to Use ROAS vs ROI
Use ROAS when:
- Comparing performance across campaigns or ad sets.
- Evaluating platform efficiency, like Meta vs TikTok.
Use ROI when:
- Analyzing true profitability of marketing spend.
- Factoring in product costs, shipping, and overhead.
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Is ROAS the same as ROI?
No. ROAS looks only at ad spend versus revenue, while ROI includes all costs and shows profitability.
What is a good ROAS?
Many marketers aim for 3.0x or higher, but it depends on margins and industry benchmarks.
Why does ROI matter if I already track ROAS?
Because ROAS can look strong even if product costs eat into profit. ROI shows the true business impact.
