What is ROI and why is it important?

Stephen McCance April 24, 2014

From the recent interest that we have had in our Glossary page, we have decided to expand on some of the search and SEO related terms that we are asked about most frequently, starting with that all-important ‘ROI’.

ROI stands for ‘Return On Investment’ and it is of paramount importance when investing in any marketing activity, including SEO and paid search such as retargeting or PPC. Your ROI is a performance metric that can be used to identify how efficient your investment is in a certain medium, or to compare how efficient various activities are when allocating budgets and marketing spend.

To work out your Return On Investment, the amount that the chosen medium has generated (the return) is divided by the amount invested (or, the cost). Return on investment figures are expressed as either a ratio or a percentage.

ROI figures can be used to identify the most cost efficient and effective methods of marketing your business, and whether or not a certain medium is worth continuing or investing in further, or, equally, whether it is best to cut your losses and cease investing in certain activities. Put simply, it is an effective gauge of where to spend to generate the maximum results for your business.

ROI is a metric that is particularly useful in paid search campaigns, especially PPC, display advertising and retargeting.

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