ROI (Return On Investment)

ROI stands for Return on Investment. It is a metric used in economics and finance to measure the effectiveness of an investment or to compare the effectiveness of different investments.

ROI is calculated by dividing the net benefit (precisely the return) obtained from the investment by the cost of the investment, and multiplying the result by 100 to get a percentage. The formula looks like this:

ROI = (Total Gain – Investment) / Investment x 100

sometimes also expressed as:

Net Gain / Investment x 100

To simplify, a positive ROI indicates that the investment generated a profit, while a negative ROI indicates a loss.

ROI is an important metric because it helps companies make informed investment decisions, ensuring that resources are allocated efficiently to maximize profits. In the context of digital marketing, in particular, ROI can be used to evaluate the effectiveness of various marketing strategies: for example, one could calculate the ROI of an advertising campaign by dividing the profit generated from sales attributable to the campaign by the cost of the campaign. Identifying the ROI of SEO strategies can be complex, but it could be calculated by dividing the expenditure on SEO activities and the results we actually get, specifically monitoring certain KPIs such as ranking, organic traffic, bounce rate and so on.