What Is ROI in Computer Technology Terms?

ROI helps you determine the potential of an investment you will make, or how well a current investment is doing.

ROI (return on investment) is an important formula in Web marketing. The term is used frequently with advertising or any other online investments. When you run a company that advertises or host a website that publishes advertisements, you cannot avoid learning about this particular phrase and what it means to you.

Definition

ROI is a proportion that calculates the efficiency of your investment, applying the amount you gained from your investment and the amount you spent on it as factors in an equation that determines how much potential earnings the investment offers. You can also use ROI to calculate the efficiency of multiple investments, as long as you apply their costs and gains correctly and accurately.

Relation to Computer Technology

As the technology market gets bigger, more people are trying to use the Internet to make money. ROI is the chief formula most people use to determine the potential of an investment. This is not only used in technology and Web advertising but in many other zones as well.

Formula

To calculate your ROI, you need to subtract the cost of your investment from your gains and divide the result by the cost again. If you are gaining the same amount you are paying, you will end up with an ROI of 0. The formula looks like this: ROI = (gain -- cost)/cost. If you make $300 from an investment for which you paid $250, using the ROI formula, your result is 0.2.

Negative ROI

One of the most frustrating aspects of marketing online is having a negative ROI, meaning that you are spending more than you are earning. When you have a negative ROI, you should consider either making the best of your situation and risking another investment that might yield a positive ROI or investing in something completely new where the potential is already high.

Considerations

Calculate your ROI to help you determine areas where improvement is needed and areas where your investment is paying off. This can prevent you from wasting money in a poor investment.

References

• Investor Words: ROI Definition
• Investopedia: Return on Investment