ROAS Vs. ROI: Know The Difference Please
The terms ROAS and ROI are often thrown around interchangeably in the PPC world. Aside from the ongoing misuse and ambiguity of the terms “bi-monthly” and “bi-weekly,” this is my largest grammatical pet peeve.
However, it’s vital to clarify the distinction, especially when a client sets goals completely based on one of the aforementioned concepts.
ROAS = Revenue/Cost
In Google AdWords, this can be viewed by adding the “Conversion Value/Cost” column. It should be noted that AdWords actually calls this metric “return on investment” — which is incorrect.
ROI = (Revenue - Cost)/ Cost
In AdWords, this must be created via a Custom Column using the following:
(Total Conversion Value - Cost)/Cost
While ROAS has been the preferred form on the advertiser side in recent years, this is changing (for the better). More often than not, clients want to see improving margins, as it gives a clearer picture of how ads actually impact their business. This transition reflects the ongoing collapse of the wall between “what the advertiser wants” and “what the client wants,” and realizing these are one and the same.
When formulating initial campaign strategy, confirm what the client means when it says “ROAS” or “ROI.” There’s nothing worse than sliding too far down the proverbial rabbit hole with a misguided idea of a client’s end goal, except maybe the conversation when both sides realize the discrepancy.
As the advertiser, make sure you’re always on the same page as the client with its advertising goals.