Calculating ROI, ROAS & Net Profit for Meta Ads: The Beginner’s Important Guide

One of the biggest mistakes beginners make is focusing too much on vanity metrics like impressions or clicks rather than actually measuring true return on ad spend. Properly tracking ROI enables you to optimize efforts for profitability.

In this guide, we’ll cover how to calculate return on ad spend (ROAS), understand cost per result metrics, and leverage key performance indicators (KPIs) properly. With these fundamentals, you’ll be able to assess campaign performance and make data-driven optimization decisions.

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ROI (Return on Investment) and ROAS (Return on Ad Spend) are two essential metrics for measuring the performance of digital advertising campaigns. To understand these metrics, let's start by defining them:

A. Ads Return on Investment (Ads ROI) in Facebook Ads

ROI measures the amount of return on investment relative to the cost of the investment. It calculates the profit made from an investment as a percentage of the total investment. In other words, it tells you how much money you made compared to how much you spent.

Formula: ROI = (Gain from Investment - Cost of Investment) / Cost of Investment

Suppose you invested $100 in Ads, and the campaign generated $150 in revenue. Using the ROI formula, we can calculate the ROI as follows:

ROI = (150−100) / $100 = 50%

This means that for every dollar you invested, you earned a 50% return on investment. (Not Profit)

B. Return on Ad Spend (ROAS) in Meta Ads

ROAS measures the revenue generated by an ad campaign relative to the cost of running the campaign. It calculates the profit made from an ad campaign as a percentage of the total ad spend. In other words, it tells you how much revenue you generated for every dollar you spent on ads.

Formula: ROAS = Revenue Generated / Ad Spend

Suppose you invested $100 in Ads, and the campaign generated $150 in revenue. Using the ROI formula, we can calculate the ROI as follows:

ROAS = 150 / 100 = 1.5X

ROI and ROAS are important metrics for measuring the financial performance of digital advertising campaigns. By understanding these formulas and how to apply them, you can make informed decisions about where to allocate your marketing budget and optimize your campaigns for maximum returns.

C. Net Profit:

We calculate net profit for most of our campaigns. Because, acctually this metric can prove that we are able to scale the campaign. So let’s face real numbers. You should calculate your Net Profit to see if your campaign is profitable or not.

Calculating the net profit of a marketing campaign can be done by subtracting the total costs associated with the campaign from the total revenue generated. Here are the steps you can follow:

1. Identify all the costs associated with the product, staff, shipping, campaign, including any advertising spend, creative production costs, and any other expenses related.

2. Add up all these costs to get your total campaign cost.

3. Next, measure the total revenue generated by the campaign. This could include sales, leads, or other desired actions that were driven by the campaign.

4. Subtract the total campaign cost from the total revenue to get your net profit.

Net Profit Formula for Facebook Ads: Generated Sales - (All of costs + Ad Spend)

Here's an example calculation:

Suppose you invested $100 in Ads, $20 in Content, $8 in product and the campaign generated $150 in revenue. Using the Net Profit formula, we can calculate it as follows:

$150 (Generated Revenue) - $128 (All of costs) = $22 (Net Profit)

Net Profit % Formula = $22 (Net Profit) / $150 (Generated Revenue) = 14.6%

You can utilize the powerful tools provided by Google Sheets to consistently calculate and monitor the net profit of your campaign.

Here's my expert advices about your conversion campaigns & setting realistic goals:

• As long as you don’t lose money, you can continue your campaign. So you should consistently monitor your net profit.

• Losing money during the process of conversion campaigns is not uncommon. However, it is important to recognize that investing in building a customer list is a strategic move that will ultimately train your pixels for future campaigns.

• Stop the campaign when you didn’t sell anything in a week!

• a creative or ad copy can change your entire bussiness! Invest on creatives & think about them. Also you MUST have a good offer for users.

• Meta Ads can help you a lot more than you can imagine. BUT it’s not magic! people are watching your ads. Think about people. Not the Meta Ads Dashboard!

Thanks for reading.

Happy Marketing!