Many people are asked the question of which metric is more critical, ROI or ROAS. The answer to that question depends on a variety of factors. Both metrics have different pros and cons. Let’s talk about what each one means and when it would be most appropriate to use them to maximize your business’s success.
Return on Investment (ROI) is the difference between how much money you receive and how much money was spent to get it. To calculate ROI, one must divide the gain by the cost of getting that result.
Return on Ad Spend (ROAS) is meant to help you understand how much money your ad spend brings back from the campaign itself. It’s calculated by dividing the revenue generated from an advertising campaign by its cost to get that number.
When To Use ROI
ROI is best used when looking at a campaign over multiple years. If you are using ROI as your key performance indicator, it is ideal to look at monthly results. This will help you learn changes that need to be made and why those adjustments must be implemented.
When To Use ROAS
ROAS is best used when looking at a campaign for multiple months. ROAS as a performance indicator is ideal to look at weekly or daily results. It will help you learn the changes that need to be made and why those adjustments are being implemented.
When To Use Both
Sometimes, using both metrics at the same time can be helpful. The best way to use both would be to look at ROI by month and then ROAS weekly or daily to get a comprehensive picture of what is going on with your campaign.
Keep these factors in mind while selecting the metric, as it depends entirely upon how much time you have to look at the results of your campaigns.
How ROAS compares to ROI
ROAS is better than ROI because it helps you understand where your money is being spent. The final result of an ad campaign plays a minute role here if you do not know how to get there or why you need those steps.
Comparing the ROI vs. ROAS in your company’s context requires you to have a clear-cut answer before making any changes or adjustments. It helps you define what needs work and how you can get closer to achieving success in your business endeavors.
The decision between which metric is more important depends on what you are looking at and how long it will take to see results. If you are working with a short-term campaign, ROAS is best used for making changes as soon as possible. Conversely, if your ad spending includes multiple campaigns that span years to get maximum impact, then ROI should be used to get the most accurate picture of what your business is doing.
The information about ROAS vs ROI is complex and requires thorough analysis. There are strengths and weaknesses of each one of them. It depends on what type of campaign it is being used for at any given time. You can use a platform like AppsFlyer to track both and determine which one is more important for your business.