03/04/2025
๐ฃ๏ธ ROAS is the worst way to measure channel profitabilityโฆ
Yes, itโs a great top-level indicator of campaign efficiency but is your blended X2.5, X3 or X4 ROAS generating net cash for the business?
Or are you just moving money around.
So, what are some of the specific challenges with ROAS as a performance metric:
โ Calculation: โReturn on Ad Spendโ is an over simplified. It doesnโt take into consideration the -20% VAT youโll be paying on that transaction to HMRC, or your CM1 & CM2 costs.
A good agency will either help you calculate tROAS by category, SKU and channel. There are also handy tools available like Profit Metrics which enables POAS bidding in Google Ads.
โ Manipulation: How many times have you seen more spend pumped into less incremental activity (e.g. branded search) and then an agency celebrating an improved blended ROAS in their weekly report?
โ Manipulation: How many times have you seen more spend pumped into less incremental activity (e.g. branded search) and then an agency celebrating an improved blended ROAS in their weekly report?
โ Higher tROAS doesnโt always equal more profit: In fact, when tROAS is too high it can throttle growth and new customer volume.In this video, weโll dive into why this is sometimes the case, and how our paid team helps brands to overcome thisโฆ
