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I might be misunderstanding... but, negarive ROI? I.e, the more they spent on ads, the less sales they got? Feels like a missed something, as that sounds... co
by saganus 6y ago
I might be misunderstanding... but, negarive ROI? I.e, the more they spent on ads, the less sales they got?
Feels like a missed something, as that sounds... counterintuivie.
(Not in any way related to the ad industry so pardon my ignorance)
- jmfisch 6y agoAs I read it, the amount they were spending on the ads themselves was more than the converted revenue from ad clicks. While the decline was probably (guessing) not linear, spending more on ads led to less than proportionally more revenue. If that had happened I can imagine calling that negative ROI.
- saganus 6y agoThat makes more sense! Thanks
- qeternity 6y agoNo. A negative ROI just implies that the ratio of benefit/cost is less than one. If I incur a cost/investment of $100 but it creates value of $200 then I have an ROI of 100%. If this same expenditure instead only produced $80 value then I would have -20% ROI as in the value I’m realizing from my investment is 20% less than the cost of the investment.
- alacombe 6y agoRatio can't be negative, they can either be above of below 1. What you are talking about is "$benefit - $cost", not "$benefit / cost".
- rocqua 6y agoWe tend to call most rations below 1 'negative'. Its technically wrong but most people get what you mean when you say it.
- ducttapecrown 6y agoPositive and negative are the right words on a log scale :D
- deleted 6y ago[deleted]
- ddulaney 6y agoROI is (net benefit)/(cost), where net benefit is (gross benefit - cost). Net benefit can be negative, making ROI negative if cost exceeds benefit. GP was using benefit as a shorthand for net benefit, which can certainly be negative.
- loeg 6y agoEven gross benefit could conceivably be negative, if the ads are bad enough! (I.e., a terrible ad might prevent a sale.)
- benjam47 6y agoRatio can't be negative, but ROI can. Positive ROI is the percentage of the ratio being 1 or higher. Negative ROI is the percentage of the ratio being less than 1. Or, from a "common sense" perspective, if I spent $1000 on advertising, and earned $100 in revenue from that investment, my ROI is definitely negative.
- jacob019 6y agoI would expect: ROI > 1 = profitable ad spend 0 < ROI < 1 = ad spend does not cover its cost ROI < 0 = losing money because of the ad spend (the ad is damaging to your brand)