So, Many people working in the Online marketing and sales field often hear these two words but most of them are pretty confused. So, let’s clear your confusion on this topic in the most easiest way.

Table of Content.

1. What is ROI?
2. What is the Formula For ROI?
3. What is ROAS?
4. What is the formula for ROAS?
5. What is the difference Between ROI and ROAS?

• What Is ROI?

ROI stands for “Return on Investment”. It tells you how much you get back on your investment

Let’s suppose you have invested 100$ and made 200$ in return which means you made an extra 100$, so the ROI is 100 % or 1x.

• What is the Formula For ROI?

To calculate ROI, First, you need to find the profit

How?

Profit = Revenue – Investment = 200$ – 100$ =100$.

ROI = Profit / Total Spends*100 = 100$ / 100$*100 = 100%.

• What is ROAS?

ROAS stands for Return on Ad spend. It tells you how much you get back on your just ads spends.

Let’s suppose you have invested 50$ in ads and made a revenue of 100$. This means your Return is 2x or 200 %.

• What is the Formula For ROAS?

ROAS = Revenue from an ad / Total Spend * 100 = 100$ / 50$ * 100 = 200 %

• What is the difference Between ROI and ROAS?
• ROI includes all expenditures (people cost, software cost everything else) whereas ROAS includes the cost of campaigns’ or ads only.
• With ROI you will come to know the profit of the business whereas in ROAS you only come to know how well your ad campaigns are performing.
• ROI is for a long-term metric for your business whereas ROAS is just showing your campaign’s performance
• Most advertisers things if their ad campaign is giving ROAS of 2x or more then their business is profitable which is not true since it does not include the cost of other expenditures.

Solve Examples.

1. Revenue = 4000$, Advertisement cost= 500$, Agency fees = 1000$

In the above example to calculate ROI, First, you need to calculate the profit and total spending. in the above example, the total spend will be 1500 $ {Advertisement cost(500$) + Agency fees(1000$)} and the Profit is 2500 $ {revenue(4000) – total spend(1500)}.

So, The ROI will be = Nett profit / Total spend *100 = 2500$ / 1500$ * 100 = 166 %.

ROAS will be = Revenue/total spend *100 = 4000$ / 1500 $ * 100 = 266 %.