For a long time now, I've noticed a disturbing trend in the use of the term "Return on Investment" (ROI). Since the ROI equation is really just about division, I'm going to take a minute or two to go over the details of what the real ROI is about and how you can use it in the optimization of your SEM and other interactive advertising activities. Be forewarned here, kids, we're going to be talking about mathematical equations here today. But don't panic, it's nothing close to John Nash level equations, just simple division and multiplication.
In my almost ten years of working in the interactive advertising field, I've noticed a disturbing trend in the use of the term "Return on Investment" or ROI. The problem isn't a flat out inaccurate use of the term, because its true definition has softened over the years, but more along the lines of a complete disregard of the equation's potential due to sheer laziness. For instance, in the past week alone, I've read two different electronic books that promised an "increase in your ROI" by using their methods. However, once I got past the promising title, I found out that the author doesn't even bring up the equation for determining this important measure of Profitability.
I guess I can't get too upset about this abuse; math has always been a point of contention for a wide range of people, including myself. In fact, I even switched majors during my undergrad days from computer science to advertising because I couldn't get past Discreet Mathematics. But since the ROI equation is really just about division, I'm going to take a minute or two to go over the details of what the real ROI is about and how you can use it in the optimization of your SEM and other interactive advertising activities.
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