ROI vs ROAS: Why Your Ad Dollars Need to Be Measured Smarter

If you’re a business owner running Google Ads or Facebook Ads, you’ve probably asked yourself questions like:

• “Are my campaigns profitable?”

• “Is this ad spend really paying off?”

• “Should I keep pushing this campaign or pull back?”

  
  

That’s because in paid advertising, it’s not enough to get clicks. It’s about return, how much you get back for what you put in. That’s where ROAS (Return on Ad Spend) and ROI (Return on Investment) come in. But many advertisers mix them up, or only look at one without understanding its limitations. Let’s break down what each means, why both matter, and how you, as a business owner, can use them to get more value from your ad spend.

What are ROAS and ROI?

ROAS is a relatively simple metric: it tells you how much revenue you earn for every dollar spent on ads. ROAS=Revenue generated by ads/Ad Spend

So, if you spend $1,000 on Facebook ads and you generate $4,000 in sales directly from those ads, your ROAS is 4x or 400%.

ROI, by contrast, takes a broader view. It looks at all the costs involved (ad spend, overheads, production costs, personnel, etc.) and asks: after all that, how much profit did I actually make?

ROI=Net Profit/Total Cost×100%

So, using the same $1,000 ad spend example, if your total costs (ads + staff wages + fees + production) are $3,500, and revenue is $4,000, your net profit is $500 → ROI is about 14%.

Why You Need Both

Focusing only on ROAS might trick you into thinking an ad is doing well, while real profitability (ROI) is suffering. Several insights from marketers and reports show this is a common issue:

• A guide by Digital Oasis explains that knowing your ROAS helps you allocate ad spend (e.g. which campaign to scale), but it doesn’t tell you the full financial picture if you ignore other costs. (Digital Oasis)

• Platforms report ROAS easily (Facebook, Google), because they see ad spend vs revenue. But they don’t manage your other expenses, production, staff time, or other channels involved.

For example, some Facebook Ads benchmarks in 2025 show average ROAS between 2x–4x depending on industry. That might sound decent, but if your margins are tight, that ROAS may translate to little or no profit once other costs are considered.

On the flip side, ROI gives you insight into whether your business is genuinely earning more than it’s spending, the ultimate goal. But ROI is harder to measure and attribute properly, especially when multiple ads, channels, and touchpoints are involved. Forbes recently discussed how different attribution models (first-touch, last-touch, multi-touch) change what “ROI” looks like depending on what interactions you count.

Key Stats That Show What Good Looks Like

Here are some stats from recent years to give you perspective:

• In a 2025 benchmark report, many businesses see a ROAS of 2.19x overall on Facebook Ads across industries.

• Other reports show that digital marketing channels (including SEO, email, PPC) can generate ROI ratios of 5:1 or higher, meaning $5 return for each $1 invested, when strategies are aligned, audiences targeted well, and campaigns optimised.

• For Google Ads specifically, studies in Australia and elsewhere show that high-intent keywords (people ready to buy) often have much higher returns than generic keywords, even if their cost-per-click (CPC) is higher. Efficiency comes from capture and conversion.

  
  

How to Improve Your ROAS AND ROI

Knowing what the metrics are is one thing, increasing them is another. Here’s how you can improve both:

1. Track correctly

   • Make sure your conversion tracking is set up properly (for both online purchases and offline where relevant).

   • Use multi-touch attribution where possible so you understand the full customer journey, not just the last click.

     
     

2. Optimise for high-intent traffic

   • Focus on keywords or audiences who are closer to buying. Generic interest is cheap, but conversion rates are often low.

   • Use remarketing / retargeting to reconnect with people who already showed interest, they usually deliver better ROAS & ROI.

3. Improve your funnel & creative

   • Does your landing page match the promise of the ad?

   • Is your copy or creative compelling and relevant?

   • Test different ad variations (images, headlines, calls to action) to see what resonates better.

4. Control costs outside of ad spend

   • Reduce friction in the process (slow websites, poor UX, confusing checkout) because lost sales eat into your ROAS.

   • Keep fixed costs in mind when calculating your ROI (production costs, staff time, tools).

5. Set realistic benchmarks and goals

   • Know what good ROI looks like in your industry, ecommerce, service-based, B2B all vary.

   • Don't blindly chase high ROAS if it requires too much cost elsewhere; the goal is profit, not just high multipliers.

Common Pitfalls to Avoid

• Over-focusing on ROAS alone: A campaign with ROAS of 6x might be great if your product margin is high, but could mean losses if every sale has large fulfilment or overhead costs.

• Ignoring long-term value: New customers might cost more up front but bring more value over time; CLTV (Customer Lifetime Value) should factor into ROI.

• Mistaking short-term cost cuts for long-term strategy: Cutting budget on creative or customer service to improve short-term ROI can harm brand reputation and long-term revenue.

Bottom Line: Your Ad Spend Deserves More

For any business investing in paid ads, understanding both ROAS and ROI isn’t optional, it's essential. ROAS tells you how efficiently your ad dollars are being used. ROI tells you whether you are making profit after all the costs.

If you’re running Google or Facebook ads, your goal should be:

• Measure both metrics

• Improve funnel efficiency

• Align spend with profitable traffic

• Periodically review all costs, not just ad spend

When done right, smart management of ROAS and ROI turns your ad campaigns from cost centres into profit drivers.