Return on investment
Net profit as a share of everything you spent: it tells you whether you actually made money after all costs, not whether the ads brought back revenue.
Formula
ROI = (net profit ÷ total costs) × 100
A worked example (hypothetical numbers)
Say a month's sales are 100,000 EGP, product, shipping and fees cost 60,000, and ad spend is 20,000. Net profit = 100,000 − 60,000 − 20,000 = 20,000 EGP, and total costs are 80,000. ROI = (20,000 ÷ 80,000) × 100 = 25%. ROAS for the same month is 100,000 ÷ 20,000 = 5, a figure that says nothing about that profit.
The numbers are illustrative, only to show the arithmetic. They are not real results or market averages.
How to read it
- ROAS measures revenue against ad spend alone; ROI includes every cost. That is why ROAS can be high while ROI is weak or negative when your margin is thin.
- Before comparing two periods, make sure costs are counted the same way in both, or you are comparing two ways of counting rather than two periods.
- ROI is measured after the period ends. The daily budget decision needs the break-even point, because that is worked out before the spend, not after it.
The common mistake
Judging profit from ROAS alone. Large revenue against a small ad bill looks excellent until you add product cost, shipping and returns, and find you are selling for almost no profit.