Quick, Stupid question on ROI...

Discussion in 'General Marketing' started by shkad14, Nov 19, 2008.

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  1. #1
    I keep reading about 100% and 150% ROI. Maybe I am missing sometihng.
    I saw a guy post bragging that he spent $1000 in advertising and made $1000. Does this mean he made $2000 total for a profit of $1000, or does it mean he made back what he spent, which really means he made nothing?

    When some one says 100% ROI on $1000, does that mean they made $2000 minus expenses, or does it mean they made $1000 total.

    Can some one answer this for me...Thanks
     
    shkad14, Nov 19, 2008 IP
  2. PHPGator

    PHPGator Banned

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    #2
    It is a ratio, but it can be used a lot. Typically it is the gain or the loss.

    So if you made $20 on your $100 investment then you probably actually made $120, but you aren't counting the $100 that you had to spend to make that. I would consider this to be a 20% ROI.
     
    PHPGator, Nov 19, 2008 IP
  3. Mecal

    Mecal Peon

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    #3
    Yup, and if you spent 1000$, and made 2000$ then you've made 1000$ profit, which is what the poster was probably referring to. Since you doubled the money spent, that'd be 100%
     
    Mecal, Nov 19, 2008 IP
  4. shkad14

    shkad14 Well-Known Member

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    #4
    So, IF you spent $1000 and made $2000 , then he really made $3000 total, right? 100% ROI desnt mean you make what you spent does it?
     
    shkad14, Nov 20, 2008 IP
  5. gordon08

    gordon08 Peon

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    #5
    You'll have to ask the guy what exactly he meant.
    My reading of this is that he spent $1000 and made $1000, which means to me that he had a net profit of $0.

    My reading of this is that he doubled his investment.
     
    gordon08, Nov 20, 2008 IP
  6. fire3fly

    fire3fly Peon

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    #6
    ROI means Return on Investment.

    If a person spends $1000 on pay per click (for example) and they end up making $1000 back..they have broke even.

    If a person spends $1000 and they end up making $2000, they have gotten a $1000 profit which is 100% ROI.

    Finally, if they spend that same $1000, and make back $2500, they have made $1500 in profit, which would be 150% ROI. (not too shabby ;))

    Carmen
     
    fire3fly, Nov 20, 2008 IP
  7. Mecal

    Mecal Peon

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    #7
    Nope, it would go like this.

    He starts out with $1,000 and spends all of it.
    Now he's at -$1,000.
    However, he then makes $2,000.

    So now he's covered his $1,000 investment, and made an addition $1,000 on top of it.

    If you make what you spend (i.e. spending 10$ and making 10$) you'd break even, for 0%. But if you spend $10, and make $15, then you have a 50% ROI.
    And if you spend $10 and make $20, you have a 100% ROI, and so on.
     
    Mecal, Nov 20, 2008 IP