Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
It still has uses, but the old-school methods of ROAS analysis are outdated.
Keep in mind ROAS is an “in-app” measurement. If your marketing team or agency is focused on showing off screenshots of ROAS metrics while your bottom line is stagnant, you may want to send them this MPI checklist to get up to date.
Making data-driven decisions is only helpful when it’s based on data that is actually reflective of a business’s health.
Although ROAS was once the default for measuring profitability, it can be misleading.
Misleading data can be disastrous for your company.
Why?
Because it doesn’t tell you the whole story. ROAS might look great in-platform, but if overall growth and new customer acquisition are stagnant, you could be scaling spend that isn’t helping the bottom line.
On the other hand, ROAS could look terrible. But turning off that low-ROAS campaign could be an essential element in your customers’ journey that drives growth down the line.
ROAS is composed of two key components that provide a snapshot of how much revenue your campaigns are generating compared to how much you are spending:
The money you make directly from ads on that platform.
The amount of money you’ve invested in your advertising campaigns during a set period.
Let’s say you’re running ads on Google and Meta. Google shows you a 5.0 ROAS, while Meta comes in at 3.5. So, it’s time to shift more budget to Google, right?
Not necessarily.
That high Google ROAS might just mean it’s picking up low-hanging fruit—people who already know your brand from other efforts like Meta’s top-of-funnel campaigns.
If your marketing team is chasing ROAS, they could cut the very channels that are fueling growth. Meta might not be generating the last-click conversions, but it could be playing a critical role in priming people to search for you on Google later.
Take a snapshot of what the ROAS is across all your marketing channels when the overall business performance is good. Use these ROAS benchmarks as performance target guidelines.
ROAS is useful when you’re deciding where to put your budget, but it’s not the only factor. If you’re looking at ROAS alone, you might miss out on the bigger picture. Sometimes, the best move isn’t cutting spend on a low-ROAS campaign, but tweaking the messaging or targeting to improve long-term returns.
ROAS lets you compare how different ads are performing within a campaign. It can give you insight into which messaging angles, creative styles, or targeting strategies are performing compared to others in that platform.
A high ROAS campaign might seem like the obvious candidate for scaling, but always ask: Is this sustainable? If you’re only focusing on retargeting and bottom-funnel tactics, you’ll eventually hit a wall. Scaling works best when you balance top-of-funnel awareness efforts with bottom-funnel conversions.
ROAS can make your numbers look good in the short term, but it’s not the be-all and end-all. Balance ROAS with other key metrics like New Customer Acquisition Cost (nCAC) and Lifetime Value (LTV) to get a full picture of how well your marketing is working.
In this example you can see Facebook ROAS went up over the previous week but the top line metrics went down.
Watch how overall spend across channels impacts the topline metrics to make data-driven decisions that align with your company’s goals. All the data in the middle lets you see the interactions along the customer journey.
Imagine an ecommerce store running campaigns on both Google and Meta. Suddenly, ROAS spikes on Meta. Being an agile leader eager to maximize opportunity, it might seem like a good time to scale up those Meta ads, right?
Well, in reality, the company had sent out an email promotion around the same time, and Meta took click attribution credit for those conversions. The ads didn’t actually perform better; the email drove the sales, and Meta’s ROAS looks inflated because of the misattribution.
If the company had scaled up its Meta ads solely because of the high ROAS, it would have misallocated its budget. Instead of driving new customer growth, it would have been pouring money into retargeting, which wasn’t contributing significantly to overall growth.
ROAS is a powerful but incomplete metric. It’s great for seeing how efficiently an ad campaign converts ad spend into revenue, but it doesn’t show you the full picture. Marketing leaders should use ROAS in conjunction with other metrics—like new customer acquisition costs and gross profitability—to avoid making decisions that seem smart at the moment.
