ADSSystem

Marketing ROI calculator

Return on marketing investment measured on profit, not revenue – with ROAS shown next to it for comparison.
In one line

Enter revenue, marketing cost and gross margin to get true ROI, gross profit and ROAS side by side - plus the revenue you need to break even.

ROI % = (Gross profit − Marketing cost) ÷ Marketing cost × 100
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%
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Agency, tools, salaries, creative.
Marketing ROI -
Gross profit-
ROAS-
Break-even revenue-
ROI is measured on gross profit. ROAS is measured on revenue. They rarely tell the same story.
Return measured on profitNot on revenue1.9Q12.4Q21.4Q33.1Q4BREAK-EVEN 1

The formula

ROI % = (Gross profit − Marketing cost) ÷ Marketing cost × 100

Why ROI and ROAS disagree

ROAS divides revenue by ad spend. Marketing ROI divides the profit that revenue produced, minus what marketing cost to produce it, by that same cost. The first is a media efficiency ratio. The second is a business result.

  • Take $120,000 of attributed revenue on $25,000 of ads.
  • ROAS is 4.8×, which sounds excellent.
  • At a 42 percent gross margin that revenue carried $50,400 of gross profit.
  • Add $9,000 of agency and tooling to the $25,000 of media and marketing cost $34,000 – so the real return is 48 percent, not 380 percent.
  • Still profitable, but a different conversation, and the one the finance team is having.

What belongs in the cost

CostInclude?
Media spendAlways
Agency or freelancer feesAlways
Ad tools and analyticsAlways
Creative productionYes, amortised over its useful life
In-house marketing salariesYes for a full ROI, no for a channel ROI
Discounts and promo codesBetter handled inside margin
The rule is to be consistent rather than clever. A number that includes salaries in one quarter and excludes them in the next measures nothing. Pick a definition, write it down, and keep it while the trend is being read.

Reading the break-even line

The break-even revenue figure answers a question most reports skip: how much would this campaign have had to produce before it stopped destroying value? At $34,000 of marketing cost and a 42 percent margin, the answer is $80,952 of revenue. Anything above that is profit, anything below it is a subsidy.

That number is more useful in a planning meeting than an ROI percentage, because it is denominated in something the sales side already tracks. It also makes margin visible: improve margin by five points and the break-even bar drops by nearly $9,000 without touching a campaign.

The trap

Attribution.

Attribution. ROI is only as honest as the revenue number feeding it, and platform-reported revenue is the most over-claimed figure in marketing. Every channel counts a conversion it touched, so summing them produces more revenue than the business made.

  • Two defences.
  • First, sanity-check attributed revenue against total revenue – if channel reports add up to more than the P&L, everything downstream is inflated.
  • Second, watch incrementality rather than attribution where the budget is large enough to justify it: turn a channel off in a region and see what changes.
  • A brand campaign showing 6× ROAS on branded search is usually harvesting demand that would have arrived anyway.

Frequently asked

Take the gross profit from attributed revenue, subtract total marketing cost, divide by that cost and multiply by 100. Profit of $50,400 on $34,000 of cost is an ROI of 48 percent.
Anything above zero returns more profit than it consumed, but most businesses target well above that to cover overheads and risk. A 5:1 revenue-to-cost ratio is a common rule of thumb, though it only holds at healthy margins.
No. ROAS compares revenue to ad spend and ignores both margin and non-media costs. ROI compares profit to total marketing cost. A campaign can post a strong ROAS and a negative ROI.