How Do I Calculate ROAS and ROI?

ROAS (return on ad spend) equals revenue from ads divided by ad spend. ROI (return on investment) equals net profit divided by total cost, multiplied by 100. ROAS measures ad efficiency, while ROI measures overall profitability.

The two are often mixed up. ROAS looks only at revenue against ad cost, while ROI includes all costs and shows real profit.

How Do You Calculate ROAS?

ROAS is simple and quick.

Formula:

• ROAS = revenue from ads ÷ ad spend

Example:

• Ad spend of ₹50,000 that brings ₹2,00,000 in revenue gives a ROAS of 4, or 4:1

To find your break-even ROAS:

• Break-even ROAS = 1 ÷ profit margin
• With a 30% margin, break-even ROAS is about 3.3

How Do You Calculate ROI?

ROI shows the true return after all costs.

Formula:

• ROI (%) = (revenue − total cost) ÷ total cost × 100

Example:

• Revenue of ₹2,00,000, ad spend of ₹50,000, and other costs, such as product and fulfilment, of ₹90,000
• Total cost is ₹1,40,000, so profit is ₹60,000
• ROI = 60,000 ÷ 1,40,000 × 100, which is about 43%

When Should You Use Each?

Each metric answers a different question.

Use:

• ROAS to compare and optimise ad campaigns
• ROI to judge overall profitability
• Both together for a complete picture
• Lifetime value alongside them for repeat-purchase businesses
• Proper tracking so revenue is attributed correctly

Conclusion

ROAS tells you how hard your ad money works, and ROI tells you whether the business actually made a profit. Track both to make better budget decisions.