How to use the advertising roi calculator
- Enter the revenue attributed to the campaign.
- Enter the ad spend and any other campaign costs such as agency fees, creative production and tools.
- Enter your gross margin so product costs are taken into account.
- Compare ROI on gross profit (the real return) with ROI on revenue, and check the break-even revenue.
Worked example
$20,000 revenue, $4,000 ad spend, $1,000 other costs, 50% gross margin
Gross profit is $10,000. After $5,000 of campaign costs the campaign earns $5,000, an ROI on gross profit of 100%. The revenue-based ROI would claim 300%, which ignores the $10,000 cost of the goods sold. ROAS is 5:1 and break-even revenue is $10,000.
How it works
Total cost = ad spend + other campaign costs. Gross profit = revenue × gross margin. ROI on gross profit = (gross profit − total cost) ÷ total cost. ROI on revenue = (revenue − total cost) ÷ total cost, shown for comparison because it is often quoted but overstates profit. Break-even revenue = total cost ÷ gross margin.
Assumptions
- Attributed revenue and gross margin are your own figures.
- Overheads not caused by the campaign are excluded.
- Single period; repeat purchases after the period are not counted.
Frequently asked questions
Why show two ROI figures?
Revenue-based ROI treats all revenue as profit, which makes most campaigns look far better than they are. ROI on gross profit subtracts the cost of what you sold, so it reflects the money the campaign actually made.
What is the difference between ROI and ROAS?
ROAS is revenue divided by ad spend. ROI is profit divided by total cost. ROI is the better measure of whether a campaign made money; ROAS is handy for day-to-day bid management.
Should I include staff time?
If people spent significant time on the campaign, include an estimate of that cost under other campaign costs for a fuller picture.
Limitations
- Does not include lifetime value or brand effects.
- Relies on the attribution of revenue you enter.