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ROI Versus ROMI

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Two metrics people constantly confuse, and why the difference between them changes whether you scale a setup or close it.

ROI Versus ROMI

The two sit side by side in reports and get calculated differently by every other person. The difference is not academic: by one metric a setup looks profitable, by the other it looks like a loss — the same setup.

ROI

Return on everything you put in: traffic, accounts, proxies, software, your time. Answers «was this worth doing at all».

ROMI

Return on marketing spend only. Answers «does this particular channel work».

Why it matters

ROMI positive and ROI negative is the classic first month: the channel works but overheads eat it. The decision there is to scale, not to close, because overheads spread out with volume.

ROMI negative means the channel does not work, and no volume fixes that. The gap between those two conclusions is the gap between profit and losing several months.

What to do with the number

On its own it is useless. Comparison is useful: this month against last, this setup against that one. The absolute value depends so heavily on vertical and geo that comparing yours to somebody else's means nothing.

The underlying method is in unit economics of a setup.

Topic: Traffic

More on this topic: The tool for this

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