ROAS might be the golden child of ad tech KPIs, but is it really the best measure of success? In this sharp take, Abhijith Jayakumar, Group Director at GroupM and AI storyteller, challenges the industry’s obsession with ROAS and explores better alternatives for measuring true business impact.
It’s time we talked about ROAS—the golden child of ad tech KPIs. Return on Ad Spend is the metric we all love to flaunt in client meetings, the one we slap on dashboards like a badge of honor.
“Look, we got a 5x ROAS!” we say, chests puffed out, as if we just discovered the secret to eternal youth. But is ROAS really the be-all and end-all of advertising success? Or are we just clinging to it because it’s easy to measure and sounds impressive?
Let’s be real. ROAS is like that one friend who’s great at parties but terrible at life advice. It tells you how much revenue you’re generating for every dollar spent but doesn’t tell you the whole story. Did that revenue come from loyal customers who’ll stick around or one-time buyers who’ll ghost you faster than a Tinder date? Did it account for the cost of returns, customer service, or the fact that your ad spend might have cannibalized organic sales? ROAS doesn’t care. It’s just there to look pretty.
So, can we do better? Can we find a KPI that’s not just a vanity metric but helps us understand the real impact of our ad spend? Let’s dive in.
The Problem with ROAS: It’s a One-Note Wonder
ROAS is like a karaoke singer who only knows one song. Sure, it’s a banger, but after a while, you start craving something with a little more depth. Here’s why ROAS falls short:
- It Ignores Profitability: A high ROAS might look great, but you could still be losing money if your margins are razor-thin. Imagine bragging about a 10x ROAS only to realize you’re barely breaking even. Ouch.
- It Doesn’t Measure Lifetime Value (LTV): ROAS is a short-term fling. It doesn’t tell you if those customers will stick around for the long haul. What’s the point of acquiring customers if they churn after one purchase?
- It’s Blind to Brand Building: Some of the best ad campaigns don’t drive immediate sales but build brand awareness that pays off months or even years down the line. ROAS doesn’t account for that.
So, What’s the Alternative?
Here’s where it gets fun. What if we stopped obsessing over ROAS and started thinking about KPIs that actually reflect the health of a business? Here are a few contenders:
- Customer Lifetime Value (CLTV) to CAC Ratio: Instead of just looking at revenue, why not measure how much a customer is worth over their lifetime compared to what it costs to acquire them? This gives you a clearer picture of long-term profitability.
- Profit-based Metrics: Let’s talk about Return on Ad Profit (ROAP). Instead of focusing on revenue, why not measure actual profit after all costs? It’s a little harder to calculate, but it’s way more meaningful.
- Engagement Metrics for Brand Campaigns: For campaigns focused on awareness, maybe we should look at metrics like ad recall, sentiment analysis, or even social shares. Not every campaign needs to drive immediate sales to be successful.
- Incremental Sales: This one’s a game-changer. Instead of just looking at total sales, measure the incremental sales driven by your ads. Did your campaign actually move the needle, or were those sales going to happen anyway?
The Bigger Picture: It’s Not Just About the Numbers
No single KPI is going to give you the full picture. ROAS is a useful tool, but it’s just one piece of the puzzle. The real magic happens when you combine multiple metrics to get a holistic view of your campaigns. Think of it like a buffet—why settle for just the breadsticks when you can have the whole spread?
And let’s not forget the human element. At the end of the day, advertising is about connecting with people. Are your ads resonating with your audience? Are they building trust and loyalty? These things don’t always show up in a spreadsheet but are just as crucial as any KPI.
Let’s Stop Playing It Safe
ROAS is comfortable. It’s familiar. But we must ask more challenging questions to truly innovate in ad tech. What are we really trying to achieve for our clients? How can we measure success to align with their long-term goals? And most importantly, how can we do better?
So, the next time you’re in a meeting and someone starts waxing poetic about ROAS, challenge them. Ask, “But are we really measuring what matters?” If not, then maybe it’s time to rethink our approach.
What do you think? Is ROAS still the king, or are there better KPIs out there? Let’s start a conversation—because if there’s one thing ad tech professionals love more than ROAS, it’s a good debate.