ECHO EMISSARY

Glossary

ROI (return on investment)

ROI (return on investment) is a payback metric: the profit an investment produced relative to its size, expressed as a percentage.

In plain words

ROI answers a simple question: how much came back for every unit of money invested. A positive ROI means the investment paid off and earned extra. A negative one means less came back than was spent.

How it is calculated

ROI = (return - investment) / investment x 100%.

A hypothetical example: 10,000 units were invested in ads and lead handling, and the result was 14,000 of profit before deducting these costs. ROI = (14,000 - 10,000) / 10,000 = 40%.

In traffic arbitrage, ROI is calculated more simply: payouts for approved actions minus traffic costs, divided by traffic costs.

Why it matters to an owner

ROI lets you compare things that are otherwise hard to compare: channels, campaigns, projects. It shows where to add money and where to stop.

What counts as investment matters. If you count only advertising, a channel may look profitable even though handling its leads takes half of the team’s time. An honest ROI includes sales salaries, telecom costs and partner commissions.

Common mistakes

  • Using revenue instead of profit. Revenue of 14,000 with a cost of goods of 9,000 is a completely different payback.
  • Calculating ROI too early, while leads are still being processed or are on hold.
  • Ignoring repeat purchases: a channel that brings clients for years may look unprofitable on the first deal.

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