If you’re spending money on ads, you’ll naturally want to know what you’re getting back. That’s where ROI comes in. ROI stands for return on investment, and it’s one of the most important metrics when it comes to digital advertising.
What is ROI in simple terms?
ROI tells you how much profit you’re making from your marketing spend. In the context of digital advertising, it helps you understand whether your ads are worth the money you’re putting into them.
The basic formula is:
ROI = (Revenue from ads – Cost of ads) ÷ Cost of ads
For example, if you spend £100 on Facebook Ads and generate £300 in sales, your ROI would be:
(£300 – £100) ÷ £100 = 2.0 or 200% ROI
That means for every £1 you spent, you made £2 back – a solid return.
Why ROI matters
Knowing your ROI allows you to make informed decisions about where to spend your money. It helps you:
- Identify which ad platforms perform best.
- Understand what kind of messaging or creative works.
- Avoid wasting money on campaigns that don’t convert.
- Scale up successful strategies with confidence.
Without tracking ROI, it’s easy to throw money at ads that look good but don’t actually bring in sales.
What affects the ROI of digital ads?
There are several factors that can impact your results:
- Targeting – Are you reaching the right people?
- Ad creative – Does your ad grab attention and encourage clicks?
- Landing page – Does your website or offer convert visitors into buyers?
- Platform – Some businesses do better on Facebook, others on Google or TikTok.
- Industry – High-ticket services may see a higher ROI than low-margin products.
It’s also worth noting that ROI might be lower at first while you’re testing what works. That’s completely normal.
ROI vs other marketing goals
Sometimes, digital advertising isn’t just about direct sales. You might be trying to build brand awareness, grow an email list, or get more traffic to your site. In those cases, other metrics – like cost per click (CPC), cost per lead (CPL), or impressions – might be more relevant in the short term.
Still, it’s important to connect those goals to revenue eventually, to make sure your efforts lead to business growth.
How can small businesses track ROI?
- Use Google Analytics or platform-specific tools to see how many visitors, leads, or purchases come from your ads.
- Set up conversion tracking (especially on Facebook or Google Ads).
- Track costs and income regularly – even a simple spreadsheet can help.
- Don’t forget to factor in profit margins, not just revenue.
The ROI of digital advertising tells you if your ads are making money – and it’s a key metric for any small business that wants to grow wisely. By tracking your ROI and learning what works, you can make smarter decisions and stretch your marketing budget further.
