How to calculate ROI in Affiliate Marketing?

One of the most common terms in affiliate marketing is the concept of ROI. Anyone who works with traffic knows that the higher the ROI, the better. In most cases, this indicator is also one of the main metrics that allows you to talk about the success of the advertising campaign. In order to better analyse and evaluate the results of advertising campaigns, the webmaster needs to calculate how much money he has spent in total and what percentage of his investment has been returned to him in net profit. This will help him to better analyse the work done and to further optimise it.

Return On Investment

ROI - return on investment. In simple words - a coefficient that shows the return on investment (profit or budget loss). This parameter is calculated as a percentage, where the maximum negative value has a lower limit of -100%, and the positive percentage has no limit. ROI should be monitored as soon as an advertising campaign is launched (e.g. in a tracker), as this indicator most clearly shows the progress of the process. The tracking algorithm is quite simple: a positive result is displayed in green and a minus result in red.

How to calculate ROI?

For the calculation, it is necessary to take into account two indicators: the amount of budget spent and the amount of profit received for a fixed point in time. Expenses usually also include absolutely all the funds that were spent to launch the advertising campaign, including costs for tools, use of services, contacting a technical specialist for layout or adaptation of the lander, etc.

For example, advertising costs were $6518 and revenue was $11417. Therefore, the profit of the campaign is $4900.

According to the formula: (11417 - 6518)/6518× 100% = 75%

Based on the example, we can see that this result is positive and has a corresponding color in the tracker. For those who do not want to calculate ROI manually, there are services that will quickly and correctly do it for you, such as the online ROI calculator from CPA.RIP.

What other concepts of ROI are there in Affiliate Marketing?

In addition to positive ROI, unfortunately also webmaster can meet negative and zero ROI:

Driving traffic to a negative ROI is a case that, as a rule, every webmaster has in his work. But you should understand that every lost budget is a chance to gain valuable experience. Driving traffic to a zero ROI means returning all the funds spent on advertising, but not making money on it.

The webmaster can analyze the entire funnel to understand what algorithm led to this result and what steps need to be taken to improve it. All ROI figures are relative and depend on the source, the offer the webmaster is working with and the budget he has. The bigger the campaign budget, the lower the ROI can be. There are often cases where even 10-20% ROI is considered quite good. Let's look at examples to see that the success rate is different in each case.

• If a webmaster has spent $1,000 on an advertising campaign, he can earn a multiple of that amount with an ROI of 100%.
• If the webmaster has spent $10,000 on an advertising campaign, he will be able to earn $1,000 with an ROI of 10%.

How to increase ROI?

• Carry out a funnel analysis, review each of its elements, run new tests for optimisation (audience setup, targeting, selected creative, landers and pre-landers, translation quality, etc.).
• Revisit the launch time of the ad campaign, match it with call center hours.
• Check the loading speed of the landers you are using.
• Check the correctness of technical settings (correct links, postback, income leads to the Affiliate Network).
• Contact your personal manager in the Affiliate Network to update and verify all information on GEO, offer and possible difficulties on the part of the advertiser.

All of the above actions are important to do in the aggregate, analyzing each point in detail. In case of negative or zero indicators, you should not stop traffic immediately, because everything can still change for the better. This algorithm of actions should be started if the negative dynamics continues for several days.

Indicators that should also be taken into account

Let's consider a few more important metrics, which also determine the success of the advertising campaign:

ROMI (Return on Marketing Investment) in classical marketing, then it is a measure of return on investment, in relation to the entire budget spent, which may include the services of a designer, copywriter, technical specialist, etc. In affiliate marketing, the webmaster calculates ROMI to get clearer data on the costs of the elements of the funnel used (what budget he spent on the whole process of its preparation).

ROAS (Return On Ad Spend) is the effectiveness of an advertising campaign. How much money the webmaster gets for every dollar spent (can be calculated in percentages and currency). This indicator does not include third-party costs, but shows the costs and their payback only for the analyzed funnel.

The ability to correctly calculate ROI, ROMI and ROAS is an essential skill that a webmaster needs to analyze, take timely action and optimize his work. It should also be remembered that absolutely any ROI is a result that gives you experience and knowledge, as well as tips on how to proceed.

With care about your ROI, dr.cash!

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