// glossary
What is ROI?
Return on Investment
ROI (Return on Investment) is the net return on an investment divided by its cost. In marketing it tells you which channel, campaign or creative paid back its dollar best. Different from ROAS: ROI counts profit, ROAS counts revenue.
// formula
ROI = (Revenue − Cost) / Cost × 100
$100K Google Ads budget producing $350K revenue: (350K − 100K) / 100K = 250% ROI. But what counts as "cost"? Just ad spend, or agency fees + COGS + logistics? Without a clear definition the number is meaningless.
// ROI vs ROAS
- ROAS: Ad Revenue / Ad Spend — isolates ad effect.
- ROI: Net Profit / Total Cost — full economics.
4x ROAS sounds great; if COGS is 60%, logistics 15%, payment fees 3%, ROI may be negative. Use ROAS for daily decisions, ROI for "should we spend more or less" decisions.
// why marketing ROI is hard
- Attribution noise — which channel actually caused a sale? Data-driven attribution tries to solve this.
- Brand effect — TV, display drive indirect lift invisible in performance ROI.
- LTV lag — a customer acquired today produces follow-on revenue in 6-12 months that ROI misses.
Serious brands look beyond a single ROI number to channel-level marginal ROI and incrementality tests.
Example: A D2C brand spends $200K/mo on marketing, generates $800K revenue, $480K COGS, $50K ops. ROAS = 4x (looks great); but net profit = $70K, ROI = $70K / ($200K + $50K) = 28%. ROAS calls it "amazing," ROI says "merely fine."