Digital MarketingROAS vs ROI: what’s the difference? (with a simple example)
A 4x ROAS sounds like your money quadrupled. But how much profit is left? ROAS vs ROI explained with a kurti brand’s real-style numbers.
The agency says “ROAS is 3.84x!” and everyone’s happy. Then the accountant asks: “After marketing, how much did we actually keep?” That’s where the difference between ROAS and ROI shows up.
What is ROAS?
ROAS (Return on Ad Spend) = revenue from ads ÷ ad spend
₹10,000 of ads brought in ₹38,400 of sales, so ROAS = 3.84x. Every ₹1 spent on ads brought ₹3.84 of revenue. Revenue, not profit.
What is ROI?
ROI = (profit from marketing − marketing cost) ÷ marketing cost × 100
It counts product cost, shipping, fees and the full marketing cost (not just ads).
An example
| Line | Amount |
|---|---|
| Revenue (60 orders × ₹960) | ₹57,600 |
| Product + shipping + fees | − ₹32,940 |
| Profit before marketing | ₹24,660 |
| Marketing (ads + content + creators) | − ₹15,000 |
| Net | ₹9,660 |
ROI = 9,660 ÷ 15,000 × 100 ≈ 64%. Less shiny than a 3.84x ROAS, but this is what you actually earned.
Break-even ROAS: your “safe” number
A good ROAS is different for every business, because margins are different.
- With a ~43% margin, break-even ROAS ≈ 1 ÷ 0.43 ≈ 2.3x
- With a 25% margin, break-even ROAS = 1 ÷ 0.25 = 4x
So a ROAS that’s profitable for one brand can be a loss for another.
When to look at which?
- Optimising ads day to day or week to week: ROAS and CPA
- Monthly accounts and budget decisions: ROI, CAC and customer lifetime value
Revenue is vanity, profit is sanity.
The full calculation, with CAC and LTV, is in the course’s Episode 35: Marketing metrics and Episode 39: Budget, ROI, CAC and customer lifetime value.