Two ways people divide
Everyone agrees on the top of the fraction: revenue minus the cost of the goods sold minus the marketing cost. They disagree on the bottom.
- Divide by marketing cost. "For every $1 of marketing, how much profit came back on top?" This is the version most marketers mean by marketing ROI, and it is the default here.
- Divide by all costs. Google Ads' help page takes revenue, subtracts the overall costs, then divides by those overall costs, product cost included. Pick this option to match it.
The calculator shows which one it used in the working, so the number you copy into a report carries its own definition.
The formulas
With revenue R, cost of goods sold G and marketing cost C:
ROI on marketing cost = (R − G − C) ÷ C × 100
ROI on all costs = (R − G − C) ÷ (G + C) × 100
Leave product cost blank (G = 0) and the first formula becomes the simplest version, (revenue − cost) ÷ cost. Use that only when the revenue figure is already a profit figure, or when you just want a revenue-based comparison.
Solving the other way:
Revenue needed = C × (1 + ROI) + G, or (G + C) × (1 + ROI) on all costs
Most you can spend = (R − G) ÷ (1 + ROI), or R ÷ (1 + ROI) − G on all costs
Worked examples
Google's example. A product costs $100 to produce and sells for $200. Six sell through Google Ads, so revenue is $1,200 and product cost $600. The ads cost $200.
- Profit = $1,200 − $600 − $200 = $400.
- On all costs: $400 ÷ ($600 + $200) = 50%. This matches Google's figure.
- On marketing cost: $400 ÷ $200 = 200%.
Most you can spend for a target. A campaign should bring $5,000 of sales with $2,000 of product cost, and you want a 150% return on the marketing cost. ($5,000 − $2,000) ÷ (1 + 1.5) = $1,200 is the most you can spend. Check: $5,000 − $2,000 − $1,200 = $1,800 profit, and $1,800 ÷ $1,200 = 150%.
Measured on all costs, the same campaign returns $1,800 ÷ $3,200 = 56.25%.
| Revenue | Product cost | Marketing cost | ROI on marketing | ROI on all costs |
|---|---|---|---|---|
| $1,200 | $600 | $200 | 200% | 50% |
| $5,000 | $2,000 | $1,200 | 150% | 56.25% |
ROI against ROAS
ROAS divides revenue by ad spend and ignores product costs. ROI subtracts them. A 3x ROAS with a 30% margin means $3 of revenue, $0.90 of gross profit and a $1 ad cost: a loss of $0.10 per $1, or −10% ROI on the marketing cost. The ROAS calculator answers "how much revenue per dollar?", this one answers "did we make money?".
What to count as marketing cost
Include what the campaign would not have cost without it: media, agency and freelancer fees, creative production, landing-page tools, and discounts or free shipping given only because of the campaign. Staff time is a judgment call; including it gives a stricter ROI. Keep the choice the same across campaigns.
Revenue should be the sales the campaign caused, not every sale in the period. That is the hard part of any ROI figure, and no formula fixes a generous attribution model.
How this calculator handles your numbers
ROI can be negative: type −20 or -20 for a 20% loss. Inputs are worked as exact fractions and the result rounds to two decimals, half away from zero. Some targets cannot be reached: an ROI of −100% or lower when solving for cost, or a target that would need a marketing cost of zero or less. The calculator says so instead of giving a number that doesn't make sense.