ROI in Google Ads, ROAS in Facebook Ads

By now, it's no secret that all effective digital advertising is financially oriented towards key performance indicators, particularly profitability. Each platform has its own metrics for evaluating efficiency, which we will discuss below.

We will focus on real, calculable metrics that you can use to set benchmarks for your ad campaigns - not on the unrealistic numbers often flaunted by "successful" marketers seeking attention. Let’s dive in.

Financial metrics in Google Ads

Google Ads developers focus on target return on ad spend (ROAS) as their key financial efficiency metric. However, the term "profitability" in this context can be misleading. Let’s explore this in more detail.

Target ROAS refers to the ratio of sales revenue to ad spend, expressed as a percentage. Among marketers, this metric is commonly known as ROI.

In practice, the calculation formula is as follows:

While ROI is an interesting metric, for an experienced entrepreneur, it doesn’t reveal much on its own. For example, what does 500% ROI really mean? Does it reflect expenses, profit, or actual profitability? Unfortunately, it doesn’t! Let’s dig deeper.

For businesses, the ratio of ad spend to total revenue is more meaningful than ROI. Specifically:

This metric helps business owners understand how much of their sales revenue should be allocated to advertising costs, and whether these ad costs fit within the current markup and pricing strategy.

Now, back to ROI — the major confusion from Google’s developers is the use of the word "profitability." Typically, profitability is calculated as:

This is the ratio of net profit to ad spend, not total sales. For this reason, in our work, we use ROI as an intermediate management tool, rather than a primary target.

You might ask: what about the 500% ROI?

It’s simple. We need to slightly adjust the formula to get the percentage relative to total revenue:

Now you can see that a 500% ROI isn’t as impressive as Google Ads might suggest. This is why it’s essential not to blindly trust high percentages from Google Ads but to understand the logic behind them. Otherwise, you could end up with unmanageable ad costs. Let’s move on to Meta’s ad platform.

Financial metrics in facebook ads

In the Facebook Ads Manager (Meta), campaigns focused on financial efficiency use their own metric: ROAS (return on ad spend), which is calculated as follows:

In Facebook, ROAS functions similarly to ROI in Google Ads and is often referred to as return on ad spend. However, as we’ve discussed, "profitability" in this context can be misleading. We wrote this article to help you avoid confusion and better understand the reality behind these metrics.

Moreover, in Facebook Ads, you may encounter data distortions due to attribution, but we’ll cover that topic in another article on attribution models.

We hope this material has been helpful to you. Until next time.

Order a service