ROAS (return on ad spend)

ROAS is the default performance metric on every ad platform, and its biggest weakness is what it leaves out: cost of goods, shipping and fulfillment, payment fees, and returns. It is a revenue ratio in a business that survives on margin, which means the same number can describe a triumph or a slow bleed depending on what sits underneath it.

Work it through. Two campaigns both report 4.0 ROAS on $10,000 of spend, so both show $40,000 of tracked revenue. The first sells a 60%-margin product: $24,000 of contribution margin against $10,000 of spend, leaving $14,000. The second sells a 20%-margin product: $8,000 of contribution against the same $10,000, losing $2,000. Identical dashboards, a $16,000 swing in what actually reached the business. Nothing in the ROAS figure distinguishes them.

This is why a ROAS target is a derived number, never a borrowed one. Breakeven sits at 1 divided by contribution margin — 2.5 for a 40%-margin store, 5.0 at 20%, 1.67 at 60% — and your target sits above breakeven by whatever profit you intend to keep. A benchmark ROAS pulled from a case study encodes someone else’s cost structure. Copying it copies their economics onto your P&L, where it does not fit.

The second limitation is attribution. Each platform credits conversions it touched, using its own window and its own view of the journey, so per-channel ROAS figures routinely sum to more revenue than the business recorded. That is not a bug in any single platform; it is what happens when several parties each claim the same sale. It means the arithmetic ROAS invites — spend times ROAS equals revenue — quietly breaks the moment you have more than one channel running.

The mistake to avoid is treating ROAS as a verdict rather than a comparison. Within one platform, holding intent and product mix roughly constant, it ranks campaigns usefully: campaign A is earning more per unit of spend than campaign B, and that is worth acting on. Across platforms, or as a claim about whether the business is profitable, it overstates by construction. For the profitability question, use a metric that only sees money in and money out: MER, or blended ROAS, computed from the P&L rather than from the ad accounts.

A practical sequence: derive breakeven from contribution margin, set the target above it, then use ROAS for within-platform decisions and MER for the whole-account judgment. If a campaign clears its target while MER drifts the wrong way, believe MER. It is the number with nothing to gain.