Greg K.SEO and analytics at Adcore · LinkedInROI, or return on investment, shows how much profit every dollar you invest brings back. The formula: revenue minus costs, divided by costs. An ROI of 50% means you got your money back plus another half on top. The big trap is that ad accounts show revenue, not profit, so ads can look like a success while the business merely breaks even. Below: the formula, an example and a calculator.
What is ROI in plain English
ROI stands for return on investment. You invest 100,000 UAH and get 130,000 UAH back: your profit is 30,000 UAH and your ROI is 30%.
It’s easy to read. An ROI of 100% means your money doubled. Zero means you got it all back but made no profit. A negative number means a loss, and minus 100% means you lost the whole amount.
The metric is more than a hundred years old. In 1914 Donaldson Brown, an assistant treasurer at DuPont, combined profit, working capital and investment into a single figure so that divisions could be compared with one another. Margin was in his formula from the start. In advertising it often goes missing, and that’s where the strange feeling described below comes from.
The ads paid off, but the money isn’t there: an example
A store owner opens the ad account: 20,000 UAH spent, 120,000 UAH in sales. Six times more. The contractor is happy, the report is full of green arrows. And at the end of the month the bank account is empty.
A hypothetical example.
The ad account isn’t lying. It shows revenue per hryvnia of ad spend, a metric called ROAS. It simply doesn’t know about the cost of goods, delivery or salaries. Even Google Ads Help builds its example this way: $1,200 in sales, $600 in cost of goods, $200 in ads, so the ROI is 50%, even though revenue is six times the ad spend.
ROI vs ROAS vs ROMI: what’s the difference
These are three different questions, and on the same example each gets its own answer.
| Metric | Question | Formula | In our example |
|---|---|---|---|
| ROAS | How much revenue does each hryvnia of ad spend bring in? | Revenue / ad spend | 120,000 / 20,000 = 600% |
| ROMI | Does the marketing itself pay off? | (Revenue − cost of goods − ad spend) / ad spend | 40,000 / 20,000 = 200% |
| ROI | Did the business make money on this investment? | (Revenue − all costs) / all costs | 0 / 120,000 = 0% |
ROI and ROMI are often used interchangeably, and that’s fine as long as you’ve agreed which costs you’re counting. ROI can apply to any investment, ROMI only to marketing. A contractor may show you ROAS and call it ROI, so always ask: “Does this include the cost of goods?”
ROI, ROMI and ROAS calculator
Enter your figures for a month or a campaign. The starting numbers come from the example above.
The ads paid off on paper, but the money isn’t there
Break-even ROAS: 200%. ROMI counts marketing only, ROI counts all costs. The break-even is based on the margin after cost of goods; fixed costs are not included.
What counts as a good ROI
Anything above zero means a profit, and there’s no single right number. You’ll often come across the “5:1” rule: Mailchimp and Oracle say good marketing brings in $5 for every $1 spent. They cite no study to back it up, and they’re counting revenue, so it’s really ROAS. At a 20% margin, that figure means exactly zero profit.
An honest benchmark comes from your own margin. Ads break even when ROAS equals one divided by the margin:
Break-even formula from Shopify: 1 / margin after variable costs.
That’s why an electronics store with a thin markup can lose money where a beauty salon is already doing well, even at the same ROAS. Beyond that, compare your ROI with your own previous period and with what the same money would have earned elsewhere. HBR notes that some companies set their own threshold, taking into account risk and the cost of capital.
Look at the absolute amount too. An ROI of 400% on 10,000 UAH invested gives 40,000 UAH in profit, while an ROI of 100% on 100,000 UAH gives 100,000 UAH. The second option looks worse in percentage terms and better in actual money, and money is what you take home.
Four mistakes that make ROI lie
HBR advises counting the full cost: creative, ad budget and people’s time. Social media ads look very profitable until you add the people who write the posts and answer customers.
The costs land in this month, but the purchase happens next month. For expensive goods, calculate over a period longer than the sales cycle.
Someone saw a targeted ad, then searched for you on Google, and the sale gets credited to search. HBR says outright that search ads often benefit from the work of other channels.
The first order may lose money, but the customer goes on to buy several more times. For these businesses, ROI is understated unless you factor in customer lifetime value (LTV).
At Adcore we build advertising around the cost of a sale, not a click: we set up analytics, connect it to your CRM and show how much each campaign earns. Performance marketing at Adcore. What exactly counts as a lead, we cover separately: what a lead is.
ROI: frequently asked questions
How do you calculate ROI for advertising?
Take your revenue from ads, subtract the cost of goods sold, the ad spend and any other costs of those sales, then divide the result by the total of those costs and multiply by 100.
How is ROI different from profitability?
Profitability usually shows profit relative to a company’s sales or assets. ROI compares profit with a specific investment, which makes it handy for judging a campaign or a project.
How is ROI different from ROE?
ROE measures profit on a company’s equity; it’s a figure for owners and investors. ROI can be calculated for any single investment.
Can you calculate ROI for SEO?
Yes, but over a longer period: the costs start right away, while leads from search build up over months. We’ve worked out what SEO costs in a separate article: how much SEO costs.
What does ROAS show in Google Analytics?
Revenue divided by ad spend. GA4 and your Google Ads account don’t know your margin, so converting this into profit is up to you.
Sources
- Return on investment (ROI), Google Ads Help.
- All channels performance report: Return on ad spend, Google Analytics Help.
- A Refresher on Marketing ROI, Harvard Business Review, 2017.
- Break-even ROAS, Shopify, September 2026.
- ROI marketing, Mailchimp.
- What is marketing ROI?, Oracle.
- The Father of ROI: Donaldson Brown, Hagley Museum and Library.