While my online product is free for users to use and a paid marketing platform for business owners, How can I calculate return on investment of advertising campaign I am running on various advertising network. Given very few details about my business, I understand it will be hard to give any specific answer, But I am looking for some guidelines to the process of determining whether it's worth to run advertising campaign or not. I am not really looking for a quick fix, but a direction in which I can keep my marketing research going.
For growing your business owner base, the ROI calculation is actually pretty simple. You calculate the value of each user (and since they pay for the service, this calculation shouldn't be too complicated) and divide that by the cost of campaign, per user who signs up.
Putting numbers on this, if a user is worth $100 in revenue, and your campaign cost you $1000 and brought in 100 users, then each user cost you $10, and your ROI is 1000%.
Calculating your public user base, that is, the users who do not pay you anything, is a little more complicated, though the process is the same. Since the users do not bring in revenue, you have to come up with another way of valuating them.
How much is having one additional user worth to you?
Answering that number gives you the equivalent of the income from a business user - your ROI can then be measured by dividing the cost of acquisition of that user by your perceived value of that user.
Alternatively, you can use the average cost of acquisition for all your users as the value of a single user (perhaps limited to those users arriving via paid promotions), and then your ROI would be the cost of a particular user divided by the average cost. This can tell you which of your campaigns was, relatively speaking, most cost effective.