When you are running a campaign you need to understand the difference between ROI and ROAS. ROI “which is a return on investment” and ROAS “which means the return on Ad spend“. ROAS only takes into account the money you spend on advertising and ROI also takes into account the company’s profit margin
These terms have become confused interchanged and used in ways that are not representative of what they truly mean so let’s see the difference
target (ROI AdWords) Return on investment is complete global number which takes in to account the company’s cost of goods and cost of operations, cost of manufacturing, cost of shipping there’s a lot of costs that go in to running a business aside from how much you spend on Adwords or How much you spend on Facebook ads or Twitter ads or media buying and what are the important numbers to know when determining profit
Return on Ad spent is much more simple and linear number. It’s simply the amount of money you made divided by the amount of money you spent on Adwords, So the ROAS formulae
How to calculate ROI:
Advertising roi formulae ROI = Revenue-cost of goods sold/cost of goods sold
Notice that the “cost of goods sold” doesn’t exclusively refer to the price of a click. Should you sell a physical solution, do not neglect to factor in distribution and manufacturing costs; for direct generation, think about the price of your nurturing campaigns.
ROI is generally the main dimension for advertisers since it reveals the actual impact that Google Advertisements has on your company. While it’s useful to know the Number of impressions and clicks you receive, it is even better to understand how your ads are contributing to the achievement of Your Company