Synonyms: Investment return Profitability measure
ROI stands for Return on Investment, a financial metric used to evaluate the efficiency or profitability of an investment. In digital marketing and business, ROI measures how much profit or value you gain from an investment relative to its cost. It’s a critical metric for understanding whether your spending is delivering the desired results.
ROI is calculated with this simple formula:
ROI = (Net Profit / Cost of Investment) × 100
For example, if you invest $1,000 in an ad campaign and generate $2,500 in revenue, your net profit is $1,500, giving you an ROI of 150%.
ROI helps businesses assess the success of various strategies, campaigns, or projects. A positive ROI means your investment is profitable, while a negative ROI suggests you’re losing money. In marketing, ROI is often used to compare the effectiveness of different channels (like PPC, social media, or SEO) to determine where to allocate budget for maximum returns.