How To Calculate Your Digital Marketing ROI

ROI, or Return on Investment, is the lifeblood of marketing campaigns. Why? Because meeting revenue goals fuels profit margins and keeps marketing budgets alive to fund future campaigns. 

Knowing how to calculate ROI in digital marketing activities is essential in any marketing toolkit. Great ROI calls for celebration. Bad ROI? Time to reassess and strategize. In this article, we’ll cover everything publishers and advertisers need to know about:

• What Is ROI In Digital Marketing?
• What Impacts Your Digital Marketing ROI Statistics?
• How To Calculate ROI In Digital Marketing
  

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What Is ROI In Digital Marketing?

Let’s start with what it isn’t. It isn’t spending a massive amount on digital ads because that’s what the experts told you to do, and then proceeding to ignore the results because the team is too busy. According to HubSpot, “40% of marketers say proving ROI is their top marketing challenge,” often due to a lack of clarity in results.

ROI measures the profitability of marketing efforts relative to all associated costs and gains incurred in the overall investment of creating and running digital campaigns. It tells you whether your advertising dollars are well spent, targeting the right people with the right strategies. Analyzing marketing returns gives teams intel into how to up their game and make the necessary switch-ups to get their revenue goals back on track. Or, in the happier scenario, invest more heavily in winning strategies going forward.

What Is ROAS?

ROAS (Return on Ad Spend) specifically measures revenue generated from advertising spend. Calculating ROAS is straightforward: divide campaign revenue by campaign costs. In general, the higher the ROAS, the more profitable the individual campaign. A good rule? A 4:1 ROAS ratio—earning $4 for every advertising dollar spent. 

Looking at the two metrics side-by-side, ROI encompasses the broader consideration of costs in digital marketing investments, whereas ROAS taps into associated advertising spend and revenue.

While ROI provides a big-picture view of profitability over time, ROAS focuses on immediate campaign performance. Together, these metrics provide both strategic and tactical insights.

What Impacts Your Digital Marketing ROI Statistics?

Understanding ROI begins with evaluating the costs associated with creating and executing digital marketing initiatives. These include creative development, market research, agency fees, ad network expenses, lead acquisition, site development, and cross-marketing activities. 

Key factors influencing ROI include:

• Campaign Strategy & Targeting
• Quality of Content & Creative Assets
• Ad Spend & Budget Management
• Conversion Rates & Lead Quality
• Performance Analytics & Tracking

Beyond the costs, metrics like unique web visitors and customer retention rates also help define a profitable ROI. Together, these factors provide a comprehensive view of your digital marketing performance.

In the following sections, we’ll explore the critical elements that shape overall marketing ROI.

Campaign Strategy And Targeting

Effective targeting is critical for ROI. For example, when Hasbro wanted to increase brand awareness and boost sales of their Play-Doh products, Next Millennium delivered a 237% increase in CTR. This success came from developing a campaign strategy that included high-impact ad formats, precise targeting, and running programmatic campaigns across premium websites to uniquely and effectively engage Hasbro’s target audience.

Developing a campaign strategy involves several paths to successful targeting, like contextual targeting. Companies typically spend about a quarter of their digital advertising budgets on hitting specific targets. Plus, getting granular on your audience will help define platform selection.   

Quality Of Content And Creative

What constitutes high-quality content or creative assets? Is it in the eye of the beholder, or is it a careful strategy to influence and capture customers ready to convert? That’s the goal: to create content and messages that convert. Truthfully, users want to be rewarded for their engagement. This may come as an entertaining or informative video, an inspiring story, a hard-hitting factual report, or a shareable quiz. If the content fails to deliver the promise, the results will reflect their disappointment. Sometimes, a simple, straightforward design can garner impressive results. Sometimes, a beautiful ad can fizzle and get passed by. Successful content marketing should engage and inform. It also builds brand awareness and trust when delivered powerfully across all parts of the campaign.

Ad Spend And Budget Allocation

It is estimated that there was “a 10% growth rate in digital marketing budget spending across businesses” between 2023 and 2024, with 72% of overall marketing budgets funneled into digital marketing channels. So, where do you start building a budget? Begin with the end in mind. What are your revenue goals? How many units need to be sold, how many subscriptions must be obtained, and how many leads must be generated to call it a success? If you factor ROAS at a 5:1 ratio or ROI at a 10:1, you begin to understand what budgets might be required. Analyze old campaigns to see what worked, or do small runs or testing to suss out winning messages before you release the gates, continuously building on successes for the next campaign. This often requires measuring marketing ROI on both the larger scale, as well as individual campaign level.

Conversion Rates And Lead Quality

Another aspect to consider when plotting positive ROI in marketing is understanding your conversion rates and the overall lead quality. Conversion rates help you measure ad performance to assess how engaged and motivated users are to buy, subscribe, take a survey, or watch your video. Higher conversion rates often equate to higher engagement and potential purchases. It also indicates that your CTA is compelling and the audience target is spot-on.

Ultimately, you want to find people on the buyer’s journey who will likely choose your product or service above all others. You can do this by creating high-quality content and informative landing pages using qualifying text, targeted capture forms, and strong lead management tactics. From there, well-trained sales and marketing professionals can nurture qualified leads through the funnel to a sale.

Analytics And Performance Tracking

Thankfully, digital advertising doesn’t have a “three strikes and you’re out” rule. However, suppose you are experiencing a fourth or fifth strikeout. In that case, it’s time to delve deeper into your analytics to understand why your campaigns aren’t capturing users' hearts, minds, and wallets. Sophisticated dashboards available to advertisers and publishers, combined with the power of ad networks, can serve up the digital marketing ROI statistics in the real-time battleground of your campaign. When used in real-time, the data informs data-driven decision-making to optimize ad spending, contain costs, and drive continuous improvements in ROI. Versus the alternative, which includes wild guesses or cross-your-fingers wishful thinking. 

How To Calculate ROI In Digital Marketing

Proving ROI starts with consistent data collection and analysis. 

Here’s the formula: ROI = (Profit / Total Costs) × 100%

We’ve established that tracking ROI helps teams justify the cost of marketing programs and campaigns. Undoubtedly, proving ROI is very satisfying and brings a host of efficiencies across marketing activities when interpreted correctly.

How effective are your digital campaigns? This job is for people who love to analyze data; whether someone on your team or through an agency or ad tech partner, accurate data collection and consistency in calculating ROI will pave the way to progress.

Below are some points to consider when determining your total digital marketing costs.    

Determine Your Total Digital Marketing Costs

To understand an overall investment, be sure to include all direct and indirect costs. Direct marketing encompasses everything from advertising, PPC, copywriting, design, apps, and email. Indirect costs include social media, services, content marketing, and SEO. When added together, they represent your total marketing costs. Accurate accounting is essential to avoid budget surprises.

Without accurate marketing cost analysis, you can stumble into what many marketing teams experience: the “oh no” moment when a critical expense is uncovered, unaccounted for in the marketing budget. Cost containment is critical and requires as much diligence as tracking revenue. Your efforts will be rewarded.

Track Revenue Generated From Marketing Efforts

Here’s what everyone on the team wants to know: Is the campaign working? The best way to answer this is to track revenue generated. If you set strong key performance indicators (KPIs) up front, you’ll have lots of juicy data to work with. Here’s where you deploy all the tools available to you through the systems you employ, like setting up conversion tracking through Google Analytics or taking full advantage of sophisticated ad network analysis. At Next Millennium, not only do we protect ad budgets and maximize ad yields with verified traffic, we provide transparent reporting and real-time metrics to ensure every dollar works hard for you.

Apply The ROI Formula

Let’s put everything together and apply the ROI formula to your marketing efforts. Start by gathering all your direct and indirect marketing costs alongside the revenue generated from your campaigns. The ROI formula is straightforward:

ROI = [(Revenue - Costs) / Costs] × 100%

A strong ROI ratio in digital marketing is typically considered 5:1, meaning $5 of profit for every $1 spent. An excellent ratio is 10:1 or higher.

Here’s a real-life example: A vacation property lead generation campaign brought in 300 leads, with a conversion rate of 5%, resulting in 15 conversions. On average, the revenue generated from these conversions was $15,000 each, totaling $225,000 in revenue. The total cost of the campaign, including ad spend and associated marketing expenses, was $12,000.

Let’s calculate the ROI:

• Revenue Generated: $225,000
• Marketing Costs: $12,000
• ROI Calculation:

In this case, the campaign delivered a 41% ROI, showcasing a successful outcome.

This example highlights how understanding and applying the ROI formula helps you evaluate your marketing efforts' effectiveness. By regularly calculating ROI, you can make data-driven decisions, optimize campaigns, and focus on initiatives that deliver the best results for your business.

Analyze And Interpret Your ROI Results

Proving strong ROI is essential for optimizing marketing budgets and strategies. Use insights to refine efforts like improving SEO, adjusting ad placements, or reallocating budgets to higher-performing campaigns. Your KPIs—such as sales cycle improvements or acquisition costs—help identify underperforming outcomes to address and overperforming tactics to scale.

Underperforming campaigns aren’t losses but opportunities to improve through strategies like refining messaging, narrowing segmentation, or optimizing landing pages. 

How To Measure Marketing ROI Success

Accurately measuring ROI in marketing requires balancing quantitative and qualitative metrics. Quantitative factors, like revenue growth, are straightforward to track and analyze. Qualitative factors, such as brand perception, lead quality, and customer sentiment via reviews and surveys, provide deeper insights into performance drivers that aren’t as easily calculated.

Avoid unexpected revenue shortfalls by setting clear goals and benchmarks at the outset of your campaigns. Proactive planning and oversight empower teams to achieve winning results by leveraging advanced tools and ad partners. This approach also ensures a consistent assessment of your marketing strategy's effectiveness over time.

Optimize Your Digital Ad Performance With Next Millennium’s Programmatic Advertising

Whether you’re a digital advertiser or business owner, tracking ROI should be an integral part of every campaign. Success is about driving long-term revenue and profitability—something Next Millennium clients know well.

Take Paul Lukas from UNIWatch: “Almost from the day we started working with them, they’ve become our biggest revenue partner.” Or Jason Urgo from Social Blade: “They’ve often doubled and tripled our ad revenue compared to our other provider.” Even third parties like MonetizePros recognize our impact, noting that our tailored solutions for publishers result in “higher CPMs and revenues from their premium advertisers.”

We can do the same for you. Our cutting-edge programmatic solutions empower advertisers and publishers to exceed their revenue goals. Elevate your ad strategy with Next Millennium.