ROI (Return On Investment) measures the profitability of an investment as a percentage. Because it is a ratio rather than a dollar amount, it makes it easy to compare very different investments. A marketing campaign, a new feature, and a server upgrade can all be judged on the same scale, which is why ROI is one of the most widely used business metrics.
How to calculate ROI
Take the profit an investment produced, divide it by what it cost, and multiply by 100 to get a percentage. A positive ROI means you made money; a negative one means you lost it.
A quick example
An investment that costs $5,000 and returns $7,000 in profit has an ROI of 140%.
Put another way, every dollar spent returned $1.40 in profit on top of itself. Expressing it as a percentage lets you line this up against any other use of the same money.
What counts as a good ROI?
Good depends on your alternatives, your timeframe, and your risk. A 20% ROI can be excellent for a low-risk, short-term move and disappointing for a risky bet that took two years. The honest benchmark is your cost of capital and what you could have earned elsewhere. Any ROI above the return of your next-best option is worth a serious look.
ROI vs. ROAS
ROAS compares revenue to ad spend alone, while ROI factors in all costs to show true profitability. Use ROAS to judge a campaign quickly and ROI to judge the business case. A campaign can post a strong ROAS and still be unprofitable once production, fees, and overhead are counted, which is exactly the gap ROI closes.
How to improve monetization ROI
Add low-overhead revenue. Adding a high-eCPM, low-overhead revenue stream like an offerwall can lift the ROI of your monetization strategy, because it earns incremental revenue without a proportional increase in cost.
Cut waste. Trim spend that does not convert so more of your budget produces profit.
Raise user value. Improving retention and LTV increases the return side of the ratio.
Offerwalls and monetization ROI
Offerwall revenue is attractive from an ROI standpoint because the cost to run it is low relative to what it earns. Once an offerwall is integrated, it monetizes existing users you have already paid to acquire, so the incremental revenue arrives without new media spend. That combination of low added cost and real added revenue is what pushes the ratio up. Because the earnings compound on an audience you already own, the return usually improves the longer the offerwall runs and the better its offers are matched.
Common mistakes to avoid
Counting revenue as profit. ROI uses profit after costs, not top-line revenue. Confusing the two flatters every number.
Ignoring timeframe. A 50% ROI over a month and over three years are not the same.
Leaving out hidden costs. Fees, staff time, and overhead all belong in the investment figure.
Frequently asked questions
Q: Is a higher ROI always better?
Q: How is ROI different from ROAS?
Q: How can an offerwall improve ROI?
Keep reading
Metric
ROAS (Return On Ad Spend) measures the revenue generated for every dollar spent on advertising. It is a direct read on whether a campaign is paying for itself.
Ad Format
An offerwall is an in-app ad unit that shows users a list of offers, such as surveys, sign-ups, purchases, or gameplay tasks, that they can complete in exchange for virtual currency or rewards. Because users opt in and choose their own offers, offerwalls are one of the least intrusive and highest-earning monetization formats in mobile.
Metric
eCPM (effective Cost Per Mille) is a publisher's estimated earnings per 1,000 impressions across any pricing model. It is the standard way to compare how much different ad units, networks, or placements actually earn.
Metric
LTV (Lifetime Value) is the total revenue you expect from a user across their entire relationship with your app. It sets the ceiling on what you can profitably spend to acquire that user.