Post by hasina789956 on Oct 28, 2024 2:27:00 GMT -5
The analysis of online advertising campaigns is essential to observe their evolution, successes, identify errors and introduce improvements in order to optimize their performance. Two of the fundamental metrics within this analysis are ROI and ROAS. Let's see what each of these concepts is and what their differences are.
About ROI and ROAS
The Return on Investment (ROI) , in short, is a ratio or rate that is used to measure the results of an advertising campaign at a financial level . That is, it allows us to know bulk email campaigns if the money invested in advertising has generated profits or, on the contrary, losses.
ROI, like any other metric, is calculated based on specific objectives that we must set before launching the campaign. These objectives are measured by the so-called KPIs, which are indicators associated with these quantifiable objectives. Here we are mainly talking about conversions, which are usually in the form of sales. But we may also want to measure visits to the website, downloads, registrations, leads, followers, engagement, etc.
The formula to calculate it would be the following:
According to this example, the ROI would be positive, since the resulting ratio is 60% with respect to a given action.
ROAS or Return on Advertising Spend directly measures the profitability of a given advertising campaign. This rate is also reflected in percentage and establishes the relationship between revenue and advertising cost . In other words, the difference with respect to ROI is that here it is calculated based on gross revenue and investment in advertising .
ROAS is another essential metric and knowing it can be very helpful, especially in e-commerce. By understanding it, we can generate strategies that are more in line with our objectives , optimize the budget we allocate for advertising and know where to allocate it exactly.
The formula to calculate it would be the following:
(Income generated by conversions / Investment) x 100
Eg. (Total income, €7,500 / Investment, €2,800) x 100 = 268%
This would mean that if we spend €2,800 a month on advertising and we earn €7,500 from the sales generated, the resulting ratio is 268%. This means that for every euro we have invested, we generate.