How to calculate ROI and ROAS of advertising: formulas and examples
What is ROI, ROAS, and CPA in marketing. Formulas with examples. How to understand that advertising is paying off and when to turn it off.
ROI vs ROAS: what''s the difference?
ROI (Return on Investment) - return on investment as a whole.
ROAS (Return on Ad Spend) - return specifically on advertising costs.
ROI = (Profit - Investment) / Investment × 100%
ROAS = Revenue / Advertising Expenses Practical examples
Example 1: e-commerce
- Spent on advertising: 100,000 ₽
- Advertising revenue: 400,000 ₽
- Cost of goods: 200,000 ₽
- ROAS = 4 (or 400%) - good
- ROI = (400k - 100k - 200k) / 100k × 100% = 100% - excellent
Example 2: SaaS subscription
- Advertising expenses: 50,000 ₽/month
- New subscriptions: 50 × 2000 ₽/month = 100,000 ₽/month
- ROAS = 2 — pays off if LTV '>' CAC
Important metrics
| Metric | Formula | What does |
|---|---|---|
| --- | --- | --- |
| CPA | Spend/Conversions | Cost of attraction |
| LTV | Check × Frequency × Months | Customer Lifetime Value |
| CAC | Expenses / Clients | Cost of customer acquisition |
| Break-even ROAS | 1/Margin | Minimum ROAS for exit to 0 |
When to turn off advertising?
- ROAS '<' 1 → you spend more than you earn
- CPA '>' LTV → attracting a customer costs more than their value
- ROI '<' 0 → loss
Calculate the ROI and ROAS of your advertising campaign with our free calculator.