ROI (Return on Investment)
By Skyword Staff on January 27, 2014
ROI (return on investment) is a measurement of the value that an investment provides. It is the return you gain relative to the price of the initial investment.
ROI is calculated with the following formula: (Gain from investment - cost of investment) divided by the total cost of the investment.
Why is ROI (return on investment) important?
Return on investment is considered one of the most important measurement metrics in determining the success of a company's marketing campaign. Using this return, businesses can get an idea of how effective they are at structuring paid advertising campaigns.
Paying a small amount of money for advertisements or keywords, and having them generate a lot of conversions or website traffic, means that those advertisements or keywords have a high return. On the contrary, if you pay a high price when bidding on keywords or ad space, and they are not performing well, then those have a low return.
ROI generally denotes the profitability of an investment, but it can be used to measure different things depending on what a marketer considers to be the costs and the returns. Return on investment can be a measurement of success in order to determine if you should continue to move forward with a paid advertising campaign.
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