whatismmm

ROI vs ROAS

ROAS is revenue divided by ad spend. ROI is profit divided by cost: (gain minus cost) over cost. A ROAS of 4.0 sounds like winning; at a 20% contribution margin it is an ROI of minus 20%, a loss. The difference between the two formulas is the margin, and forgetting it is the most expensive rounding error in marketing.

The formulas, side by side. ROAS = attributed revenue / ad spend, a gross ratio with no cost concept beyond media.2 ROI = (incremental profit minus cost) / cost, the standard investment-return definition.1 To get from one to the other you need contribution margin: ROI = ROAS x margin, minus 1. An MMM reports channel ROIs computed on incremental revenue, which quietly fixes both classic distortions at once: non-incremental revenue is stripped out, and margin can be applied explicitly.

Marginal ROAS (mROAS) is the third figure and the one allocation actually needs: revenue from the next dollar, read off the channel's saturation curve rather than averaged over all past dollars.3 Average ROAS answers "was this channel worth it"; mROAS answers "should the next dollar go here". Boards need the first; budget meetings need the second.

Which goes in the slide: report incremental ROI at a stated margin, with the margin printed on the slide. A number like "paid social: 1.8x incremental ROI at 55% contribution margin" survives finance review. A bare "ROAS 4.2" invites the one question it cannot answer.

Worked example, one channel, all three numbers

Spend $200k; incremental revenue (per model) $700k; contribution margin 50%. ROAS = 700/200 = 3.5. ROI = (700 x 0.5 minus 200) / 200 = 0.75, or 75%. mROAS at current spend, from the curve = 1.6; margin-adjusted marginal return = 1.6 x 0.5 = 0.8, below break-even, so the next dollar belongs elsewhere even though the channel overall returns 75% on its cost. All three statements are true simultaneously; only the third prices the decision in front of you.

Source ledger

Every numeric claim on this page resolves to one of these primary sources.

  1. [1]Wikipedia: Return on investmenthttps://en.wikipedia.org/wiki/Return_on_investmentretrieved 2026-08-02
  2. [2]Wikipedia: Marketing mix modelinghttps://en.wikipedia.org/wiki/Marketing_mix_modelingretrieved 2026-08-02
  3. [3]Google Meridian documentationhttps://developers.google.com/meridianretrieved 2026-08-02