To measure the success of bets, an indicator such as ROI is used. In particular, it is used on our website and often causes confusion among newcomers who bombard the admin with the question - what is ROI in betting? We answer.
The abbreviation ROI is derived from the English Return on Investment. Return on investment, in Russian. Or return on investment, such a translation can also be found. The ROI indicator is used not only in betting, but also in many other areas of economic and financial activity.
The ROI formula looks like this:
The ROI formula in betting is:
What is ROI and why is it needed at all, if you can just see who has what profit?
It's simple. Profit is an indicator that in itself says little. For example, Ivan won $10. Is he a good forecaster or a bad one? This cannot be said without knowing how much money he had to begin with and how many bets he had to make to win that much. If Ivan made a million bets of $100 and won only $10, then he cannot be called successful, right? And if Ivan made only 3 bets of $2 each and earned $10, the picture immediately changes, doesn’t it?
That is, ROI is necessary to show the effectiveness of the forecaster.
To make it easier to understand, let's use an example from real life. The janitor Vasily earned $200. Notary Semyon earned $50. Can we say that the janitor Vasily is more successful than the notary Semyon? No, we can't, because we don't know how much effort they put in to earn that much money. The janitor earned 4 times more, but for this he had to sweep the streets for a month without days off. The notary earned 4 times less, but for this he had to spend only 10 minutes certifying the document. So which one is more successful? Obviously, the efficiency of the notary Semyon is higher.
The same goes for betting. Let's say the profit of forecaster Alex123 is $200, and forecaster Kolya666 is $100. If there were no ROI indicator, one would think that Alex123 is more profitable than Kolya666. But what if Alex123 won $200 by making 1000 $10 bets, and Kolya666 won his $100 by making only 20 $10 bets? Obviously, in this case, Kolya666 is more effective and successful. That's what ROI is for - it shows the real effectiveness of the player. Shows what his profit is for every dollar he bets.
Thus, by calculating the ROI of different forecasters, you can compare their real effectiveness. This is why this indicator is used in bets.
It is important to note that if two forecasters have the same ROI, then the one with the longer distance term is more successful. For example, making an ROI of 10% over a distance of 10 bets is much easier than over a distance of 100 bets. Why? Simple: the greater the distance, the greater the investment. And we divide by investment. In other words, an ROI of 10% with a distance of 10 bets of $10 is only $10 in profit, and the same ROI with a distance of 100 bets of $10 is already $100 of profit.
What ROI is considered good? In betting, it is customary to start from 5% at a distance of 1000 bets. If a forecaster gives 5% (or more) over a distance of 1000 bets, it means he is very good. However, for a confident game of plus, 2-3% at such a distance is enough.
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The importance of ROI in marketing
Over the past few years, online advertising has bitten off significant shares of the radio, print and television market: its growth rate would be the envy of any yeast bacterium. Million-dollar budgets for context have not surprised anyone for a long time, so every advertiser asks a reasonable question: how to more accurately calculate the effectiveness of investments in advertising and, of course, increase this effectiveness to cosmic heights.
CR = number of leads or orders or targeted actions / number of targeted traffic *100%
If you received 100 hits, the number of targeted traffic is 1,000, then the conversion is 10%.
And what conclusion can be drawn regarding the profitability of the advertising channel from the above formula? Yes, none.
There is no universal pattern for choosing KPIs: for each type of activity in a specific situation, a certain metric or even a set of metrics is suitable.
A story about all the KPIs that exist in nature will make you yawn, so I have selected the most popular ones, those that are most often used to analyze the effectiveness of advertising campaigns on the Internet.
Several examples of KPI calculations for the curious
- CPA (Cost per action) - cost of an action.
CPA allows us to determine the cost of a target action.
- CPO (cost per order) - order cost
Here we already calculate how much the purchase costs us.
- ROI (return of investment) - return on investment. Hit odds! Allows you to evaluate the return on investment in advertising.
- The value of the visit. The coefficient is invaluable for determining rates in advertising campaigns.
Formula:
Value per visit = Revenue/Number of visits
- DRR (share of advertising costs). Online retailers love this metric.
I praised the ROI coefficient for a reason. I’ll tell you more about it below.
And now, actually, about the ROI coefficient in advertising
At first glance, calculating ROI looks like the simple formula that I talked about at the very beginning: income - costs/expenses *100. But it's not that simple.
Ideally, you need to deduct from income not only advertising costs, but also the total cost of the product (costs of its production, transportation, employee salaries, etc. expenses). These additional parameters must be taken into account if your task is to determine the return on investment with pinpoint accuracy.
A simpler way
It is used by many online marketers, including when working with online advertising:
Here's for clarity:
($800 billion in revenue - $400 billion in advertising costs) / $400 billion in advertising costs * 100 = 100%
It’s very simple and clear, you can calculate everything in your head.
If your number comes out positive, then you can assume that the investment has paid off; if it’s negative, something went wrong :(
Advanced method
Add a period to the formula:
ROI (period) = (Investment by the end of a given period + Income for a given period – Amount of investment made) / Amount of investment made
Sophisticated. But the formula makes it clear how much the volume of invested funds has grown by the end of the calculated period.
Why do you need to calculate ROI?
- one advertising channel (Direct, for example);
- several advertising channels (all advertising on the Internet);
- a separate product (bedside table);
- product groups (home furniture).
In this way, everyone can identify the strengths and weaknesses of an advertising campaign for a particular service or product. Thanks to modern web analytics systems, it has become easier to obtain data for ROI analysis, but difficulties still arise. You can set up goals that track sales in Google Analytics and Metrica, but if your client is not ready to tell you the product margin (or how much he earned) or does not allow you to transfer this data to analytics systems, then you will not be able to calculate ROI.
Of course, analysis without further action will yield nothing. This is a super boost to improving work efficiency.
The funny thing is that the products that the client believes should bring the maximum profit are not always the ones that show the best return on investment. And this is where the magic ROI formula will protect you from losing your money.
A contextual advertising specialist, armed with knowledge of ROI and the ability to calculate it, will devote all his passion to those advertising campaigns that show the highest return on funds. If nightstands sell better than poufs, he will focus maximum attention on the nightstands, raise the cost per click and promote the ads to the best positions. And for campaigns with a modest payback ratio, he will save your honestly earned rubles by setting a low cost per click and reducing the number of ads, and will also change the texts and perform a bunch of other useful manipulations.
Among the players betting on sports at bookmakers, you can find businessmen. But they didn't come here for fun. Betting is their business. And as in any business, it is important to know whether it pays off or not. For these purposes, the financial term Return on Investment (ROI) is used, literally meaning “return on investment.”
What is ROI (in Russian - ROI) in betting? How to understand ROI? If you consider sports betting as an investment of capital, then ROI will show how successful it was in any given period of time. Only time in this case will be measured not in days and years, but in bets made. To get the most complete picture, the number of bets should be measured in tens, or even better - hundreds or thousands.
- in the first one, I bet $100 and won $150 ($50 is net income);
- in the second, I bet $120 and won $180 ($60 – net income);
- in the third I bet $80 and lost.
Total costs were 100 + 120 + 80 = $300, and net profit was 50 + 60 – 80 = $30. In this case, ROI = 30/300 = 0.1 or 10%. This means that the return on each average bet is 10%. Naturally, this calculation, based on only three bets, cannot be taken seriously. As already mentioned, for statistics to be true, they must be based on hundreds or thousands of bets.
There is also another way to find out the ROI in bets, and it is more practical. Let's say a player made 400 different bets during the year. The size of the bet was not constant, but you can still calculate the approximate average size of one bet - $200. At the end of the year, the player calculated his capital and came to the conclusion that he made a profit on bets in the amount of $8,000. Then ROI = “profit”/(“average bet size” * “number of bets”) = 8000/(200*400) = 0.1 or 10%. As in the first case, here we received an ROI of 10%, but now this value is based on a large amount of statistical data and is quite trustworthy.
It should be noted that ROI can be not only positive, but also negative. This will happen if the player did not make a profit and suffered losses.
The ability to calculate ROI in bets is necessary to a greater extent for the player’s self-control. If the coefficient is negative, then the player should reconsider his strategy. The ROI indicator is also studied by those who want to use the services of professional forecasters and cappers. They usually do not provide direct assessments of their performance, but only provide various information, including profit margins and the number of bets placed. Based on this data, you can calculate ROI and understand how successful a particular capper is.
How can the ROI indicator be considered large? Over a distance of several hundred bets, an ROI of 7-12% is already a very good result. If we take a distance of several thousand bets, then a “swarm” of 3-7% is already a truly grandmaster result.
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ROI (return on investment)- an indicator of the effectiveness of your investments in business, literally - return on investment. The basic formula is simple:
ROI= (Income from investments - Investment size) / Investment size x 100%
By “Income from Investments”, depending on your tasks, you can understand Gross Profit or Net Profit (minus taxes, penalties, loan payments).
Let's consider the simplest example of a formula for calculating ROI: you invested a ruble and as a result earned 3 rubles - your ROI is 200%. If you invested 2 rubles and earned 1 ruble, ROI=-50%. If you returned less than you invested, you get a negative ROI.
ROI- a useful business intelligence tool. If you are looking for investors for your business, the first thing you will be asked is an estimate of the return on investment.
What ROI is considered good?
This indicator differs for different businesses. Definitely, for a break-even enterprise, the ROI must be positive. When drawing up a business plan, read case studies, consult with experts in your field, and study statistics.
When calculating your return on investment, take time into account as well. Seasonality and crisis events can affect the level of ROI for different industries.
What is ROI in marketing?
ROI in advertising - what is it? The same as regular ROI, but we only count investments in marketing. Marketing ROI, aka ROMI (return on marketing investment) shows the return on advertising. As an Internet company, we deal specifically with ROMI.
A simple ROMI formula looks like this:
Let's decipher:
ROMI= (Gross Profit - Marketing Costs) / Marketing Costs x 100%.
Gross profit (per month) = Average number of purchases (per month) x Average product price x Margin
Average number of purchases (per month) = Number of transitions to the site x Average conversion
This universal formula will help you understand how to calculate roi in contextual advertising, SEO, and integrated promotion.
Example of ROI calculation for SEO
Here is an example from life - calculating ROMI for SEO promotion of our client. We do these calculations every month.
Return on marketing investment was 337%.
ROMI pitfalls
ROMI is a useful indicator, it is convenient to analyze and summarize with its help, but you should not rely on it entirely. Be careful and consider various factors:
Sales cycle
For some transactions, the client takes more than one month to make a decision. The client could see your advertisement in January, and conclude a deal in August. Costs are written off in one month, profit is accrued in another - and it’s good if you are careful with statistics and link the transaction to the initial appeal and its source. You can calculate ROMI for a month, but how much it reflects the real picture is a question.
A good illustration is the story of one of our clients. The company sells and leases retail space in the city center. The areas are large and expensive; a decision on a transaction can take six months or more. At the same time, the profit from one transaction completely covers all marketing expenses for the year. For such companies, calculating return on investment ROI every month is pointless. Therefore, we focused only on the quantity and quality of requests received from advertising.
Average bill and profit
For some sales, it is difficult to determine the average bill - there is too much variation in the amounts for different transactions. And the profit margin for transactions of the same amount can vary (reasons: different delivery conditions, changes in logistics costs, etc.). It is difficult to determine averages.
Sale
Profit is affected not only by advertising, but also by the customer. For example, leading sales employees left the company. As a result, the rate of deal completion decreased, and as a result, ROMI decreased, but these changes are not directly related to advertising.
Let's give an example. New contractors predict your ROMI will increase from 200 to 400%. To fulfill their promises, they disable the context for all low-margin products. As a result, ROMI increased, but sales fell. It's beautiful in reports, but unprofitable for business.
conclusions
Therefore, when concluding an agreement with a client, we forecast not ROMI, but the cost of leads.