ROAS vs ROI: Which Metric is More Important for Your Campaigns?

How are you measuring the success of your digital marketing campaigns?

There are plenty of performance metrics to use, but two that rise to the top of almost every campaign report are ROAS (Return on Ad Spend) and ROI (Return on Investment).

They're often used interchangeably, but are they really the same, and does it matter?

Yes, it matters. A lot.

Let’s explore ROAS vs ROI so you can make sure you’re tracking what matters for your campaign.

Difference Between ROAS and ROI

Both ROAS and ROI help you evaluate the impact of your marketing efforts. However, they serve very different purposes and answer very different questions.

ROAS focuses on the efficiency of your ad spend. For instance, how many dollars do you make for every dollar spent on advertising? ROI, on the other hand, zooms out to assess whether your entire business investment actually pays off.

You need both metrics to evaluate the effectiveness of your campaigns. However, understanding the difference between ROI and ROAS will help you determine which metric you should use and when you should use it.

Return on Ad Spend

ROAS, is a metric that tells you how much revenue you earn for every dollar spent on advertising. The formula is straightforward:

ROAS = Revenue Generated from Ads / Ad Spend

This metric is designed to help marketers evaluate the effectiveness of their advertising efforts. It doesn't consider other operational or product-related costs. That makes it a great metric when you're focused specifically on ad performance and media buying efficiency.

Return on Investment

Meanwhile, ROI measures the total profitability of a business activity. The ROI calculation goes:

ROI = (Revenue - Total Costs) / Total Costs

ROI is used to measure true business profitability. It’s a holistic metric that reflects the success or failure of an investment across all aspects, not just ads. It’s an important metric to understand if your marketing campaign is sustainable and scalable in the long term.

And more importantly, how can you trust either metric when ad fraud is eating away at your budget with fake clicks, bots, and misleading impressions?

Summary of ROAS and ROI Differences

So, are ROI and ROAS the same?

No.

Here’s a quick breakdown of the difference between the two metrics:

Scope

• ROAS focuses solely on ad spend and the revenue directly generated from it.
• ROI considers all costs associated with a campaign or business activity.

Speed

• ROAS is designed for quick, real-time insights.
• ROI typically takes longer to calculate because of the necessary data.

Usefulness

• ROAS is most valuable for performance marketers, media buyers, and digital analysts.
• ROI is essential for business leaders who need to understand the profitability of marketing initiatives for decision-making purposes.

Choosing the Right Metric for Your Campaign

When it comes to ROI vs ROAS, one metric isn’t better than the other. Rather, it’s about understanding when to use one metric over the other (or using both). This is the key to making smarter decisions.

When to Use ROAS

• During Active Campaign Testing: Gauge how well individual ad variations are performing.

• Comparing Ad Platforms or Creatives: Evaluate which marketing channels deliver the best bang for your buck.

• Media Buying and Day-to-Day Decisions: Make tactical choices without diving into full financial reports.

When to Use ROI

• Reporting to Stakeholders or Budgeting: Communicate value to C-suite executives and investors.

• Evaluating the Entire Funnel and Operational Efficiency: Understand whether a campaign truly added value to the business.

• Product Line and Channel Profitability Decisions: Determine whether a product or customer acquisition channel is worth scaling.

Why You Should Use Both

These metrics are best used together to analyze campaign performance. While ROAS gives you fast-moving insights into your ad efficiency to make immediate adjustments, ROI helps measure the long-term success of your campaign.

By leveraging both, you can react quickly while still staying aligned with your long-term business objectives.

Protect Your Metrics from the Effects of Ad Fraud

As you can see, marketers rely on both these metrics to make important decisions. That’s why it’s essential to make sure they’re not being skewed by ad fraud.

These metrics become unreliable when inflated by fake clicks, bot traffic, or fraudulent leads. This means you could be increasing your ad spend without generating any real leads or revenue. In other words, you’re wasting your budget.

A dedicated fraud detection solution like Anura can help keep your data clean. This way, you can have confidence that your ROAS gives you an accurate view of advertising effectiveness, and ROI delivers a truthful picture of profitability.

Experience the power of Anura and discover just how much fraud you have with a free trial!