ROI and ROAS Calculator
ROI stands for “Return on Investment.” Essentially, it’s a measurement of the return on a particular investment, relative to the cost of the investment. In other words, it’s a ratio between your net profit and investment. There’s a simple formula that you can use to work out the ROI: ROI = (Net Profit / Net Spend) x 100
ROAS stands for “Return on Ad Spend.” ROAS can help you determine the efficiency of your online advertising campaigns by calculating the amount of money your business earns for each pound it spends on advertising. You can use the following formula to calculate ROAS: ROAS = (Revenue Generated from Ads / Advertising Spend) x 100.
The difference between ROI and ROAS
When it comes to ROI vs. ROAS, there are a couple of major differences. Firstly, ROAS looks at revenue, rather than profit. Secondly, ROAS only considers direct spend, rather than other costs associated with your online campaign. In a nutshell, ROAS is the best metric to look at for determining whether your ads are effective at generating clicks, impressions, and revenue. However, unlike ROI, it won’t tell you whether your paid advertising effort is actually profitable for the company.
Should I use ROI or ROAS?
When you consider ROI vs. ROAS, it’s important to remember that it isn’t an either/or situation. Whereas ROI can help you understand long-term profitability, ROAS may be more suited to optimising short-term strategy. To craft an effective digital marketing campaign, you’ll need to utilise both the ROI and ROAS formulas. ROI provides you with insight into the overall profitability of your advertising campaign, while ROAS can be used to identify specific strategies that can help you improve your online marketing efforts and generate clicks and revenue.
AppNava helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. You can go this page and try our ROI and Roas Calculator!
Do you want to know about the titles of the fields you need to enter into the calculator?
Read below for more info!
LTV is lifetime value. This is the estimated value that you expect to extract from the player. It makes more sense to couple this lifetime value with a number of days during which the user interacts with the product (the game in this case). This enables us to study whether we are on the right track, and to reason about the product. So, LTV365 is the expected (read average) value or revenue we get from a player after 365 days or 1 year after coming into contact with the game for the first time.
Retention is a measure that will tell us how the players will keep interacting with the game. Day 1 retention (D1), is a percentage of how many players returned to the game after launching it for the first time (D0). The higher the retention, the better because it means that players keep coming back, so there is something about the product/game/app that motivated them to return.
ARPDAU is average revenue per daily active user. This metric is very convoluted. By itself, it doesn’t say much. An ARPDAU of 2€ says very little. If you have a restaurant and DAU (daily active user), is the number of customers that walk in, 2€ ARPDAU might leave you bankrupt. For a mobile game, if you create a compelling title where on average you get 2€ per daily active user then you might have struck gold.
CPI is the cost per install. Lately, User Acquisition (UA), is an integral part of the business model of scaling F2P mobile games. And with more and more publishers paying to acquire users, the market is getting more and more competitive, and the cost per install and acquiring a new player is going through the roof.
So User Acquisition works just like the old fashioned advertisements. You pay upfront, to get customers/players/users walking in, and hopefully, those that convert (end up buying something), will make up for the price of the advertisement and yield some extra revenue. So it’s an upfront investment and in order to minimize the risks associated with this investment, we have to study and predict how we will make the money back with a profit.