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Keywords Marketer


What is ROI?

ROI is a financial ratio that measures the return over an investment. In other words, it shows the profitability of an investment and if it is positive or not. It is calculated, using the following formula:

(Benefits - Investment) / Investment

ROI, is a term that is used a lot in PPC as every PPC campaign has an investment in the different PPC platforms. Every business should measure the return of their investment in advertising. All of us want to know how much we have obtained thanks to our investment. Normaly, this would be very difficult to calculate in the traditional advertising media, but in the online advertising media it is much more easy as everything is measurable. 

The better our ROI is, the better our PPC campaign will be working and therefore we will continue investing on it. On the other hand, if our ROI is negative, we should think of changing our PPC strategy. 

Following is a simple example:

We invest 1000€ in PPC. Thanks to it we have obtained a total sale of 2000€. Therefore, our ROI is positive in our online advertising investment. Although we should go a step further as sales do not mean benefits. Furthermore, we should have in mind other costs in order to deduct them from the sales. Let's suppose the 2000€ sale has 1000€ of cost and another 1000€ of cost in PPC. Our investment will be same as our sales, therefore our ROI wont be positive and we should start thinking of modifying our PPC strategy. 

Furthermore, we can not just measure the return on investment in advertising by comparing it with sales. We also have to consider the rest of the costs too. This is the only way to value if our PPC campaign is being effective or not. As you can see, ROI, is a ratio, which is very important in PPC and that is why we have decided to add this term to our PPC dictionary.