If you are engaged in any form of digital marketing or online advertising campaigns for your company, then it is highly likely that you have heard about words such as ROAS and ROI.
Although ROI was previously the most preferred method of evaluating the effectiveness of digital channels, businesses and marketers are gradually starting to depend on ROAS as a measure for their digital marketing strategies.
But what is the meaning of ROAS and ROI? Or what is the main difference between ROAs and ROI for that matter? It is important to understand the difference between these two terms for you to be able to make the right decision as a marketer or business person.
Definition of ROI
ROI is an acronym for return on investment. It is basically the measurement of a specific investment in relation to the cost of investment. Simply put, ROI is the ratio between the net profit of a business and its investment. The main purpose of ROI is to help you determine if your business model is viable or not.
Definition of ROAS
ROAS is an acronym for return on ad spend. It is a more elaborate way of determining whether your advertising strategies are working or not. Unlike ROI, ROAS is more specific in the sense that it measures the exact amount of money being used on ads and whether those ads are paying off or not.
As a business owner, it is good to know what marketing strategies work best and which ones are less effective. Doing so will help you stop spending money on advertising techniques that don’t yield much to your business.
ROAS vs ROI
Many people tend to confuse return on investment (ROI) and return on ad spend (ROAS). First and foremost, ROAS focuses more on revenue instead of profit. Additionally, ROAS narrows down only to direct spending on ads as opposed to other aspects of your online campaign.
In other words, ROAS is the best metric option if you are looking for a way to determine the effectiveness of your ads in terms of generating impressions, clicks, and revenue. But unlike ROI, ROAS won’t be able to tell you whether your advertising efforts are profitable for your business or not.
Although ROAS can offer you great figures showing how ads are effective, it can’t tell whether the entire campaign project is profitable to your business. This is where ROI comes in. It is able to reveal if your online campaigns are helping your business or not.
Which one should you choose between ROI and ROAS?
When considering ROAS vs ROI, you should understand that it is not an either/or scenario. Both metrics have their place. For example, you can use ROI as a way of determining the long-term profitability of your business and on the other hand use ROAS as a short-term strategy of understanding the success of your business.
Both ROAS and ROI are great metric options for advertisers. The most important thing is to understand how each metric works. For more information, you can always check out sites like AppsFlyer.
