ROI vs ROAS: Which Metric Should You Track?
Both measure profitability, but they tell very different stories. Learn when to use each for smarter campaign decisions.
If you run paid advertising, you've probably heard both ROI and ROAS thrown around as measures of success. They're related, but they measure fundamentally different things — and confusing them can lead to very bad decisions about where to invest your budget.
What are they?
ROI (Return on Investment)
The actual profitability of your investment after accounting for all costs — including cost of goods, overhead, and operational expenses. It answers: did this investment make money?
ROAS (Return on Ad Spend)
How much revenue your ads generate relative to what you spent on the ads themselves — not including other costs. It answers: how efficiently are my ads generating revenue?
Key differences
When to use each
ROI accounts for all costs, so it tells you whether the channel is actually profitable for the business — not just whether ads are generating revenue.
A channel with 3x ROAS might have lower ROI than a channel with 2x ROAS if the first channel has higher COGS or operational costs.
Ad platforms use ROAS targets for their smart bidding algorithms. Target ROAS is a native bidding strategy in both platforms.
ROAS is a fast, apples-to-apples comparison of how efficiently different campaigns are converting spend into revenue.
Benchmarks
Highly variable by industry; legal and finance keywords can require 8x+ to be profitable
Prospecting campaigns typically lower; retargeting campaigns often 5x+
E-commerce benchmark; depends heavily on product margins
Low cost base makes email ROAS very high; ROI is the more meaningful metric here
The bottom line
Use ROAS to optimise your ad campaigns day-to-day. Use ROI to decide whether a channel deserves more budget. A campaign can have excellent ROAS but negative ROI if your margins are thin — which is why you need both.
Try the related tools
Put these metrics into practice with our free calculators.