Why Your ROAS Metric is Lying to You
The Problem with ROAS
Most agencies rely on Return on Ad Spend (ROAS) to measure success. The higher the ROAS, the better the campaign, right?
Wrong.
ROAS is one of the most misleading metrics in marketing. It tells you how much revenue was made from ad spend, but it doesn’t tell you if that revenue was profitable, sustainable, or scalable.
If your agency is optimizing for ROAS alone, you’re probably wasting money, making bad decisions, and leaving profit on the table.
Here’s why ROAS is lying to you—and what you should be tracking instead.
Why ROAS is a Misleading Metric
1. ROAS Doesn’t Account for Profitability
A 5X ROAS sounds great, but what if your margins are thin? If your cost of goods, overhead, and fulfillment expenses are too high, a "profitable" campaign could actually be losing money.
A Better Metric: Profit per Sale
Instead of just looking at revenue, track how much actual profit is left after expenses. A campaign that drives $100,000 in revenue but only nets $10,000 in profit isn’t a success.
2. ROAS Ignores Customer Lifetime Value (LTV)
A campaign might have low ROAS but high LTV. If a customer buys multiple times over months or years, the true value of that campaign is much higher than ROAS suggests.
A Better Metric: LTV: CAC Ratio
LTV = Total revenue a customer brings in over time
CAC = Cost to acquire that customer
A healthy business aims for an LTV: CAC ratio of 3:1 or higher.
3. ROAS Doesn’t Show Ad Waste
If a campaign has a great ROAS but high wasted ad spend, your budget is being spent inefficiently. You might be getting results, but not at the best cost possible.
A Better Metric: Cost Per Acquisition (CPA) vs. Break-Even CPA
CPA = How much it costs to acquire a customer
Break-even CPA = The max CPA you can afford before losing money
If CPA is higher than break-even CPA, you’re in trouble.
4. ROAS Doesn’t Consider Organic & Multi-Touch Conversions
Many customers don’t buy after just one ad. They might click an ad, visit the website, leave, then come back through an email, SEO, or another channel. ROAS only credits the last touchpoint, making it look more important than it really is.
A Better Metric: Blended CAC
This accounts for all channels (paid + organic) to get a full picture of acquisition costs.
If you’re only looking at paid ROAS, you might be overvaluing ads and undervaluing other marketing efforts.
The Metrics That Actually Matter
Instead of relying on ROAS alone, smart agencies track:
Profit per Sale - Does the campaign actually make money after costs?
LTV: CAC Ratio - Are customers worth more than what it costs to acquire them?
CPA vs. Break-Even CPA - Is customer acquisition cost sustainable?
Blended CAC - Are paid ads actually profitable in the bigger picture?
The Bottom Line
If your agency is still using ROAS as the primary metric, you’re not seeing the full picture.
Revenue doesn’t equal profit. A high ROAS doesn’t mean success.
Tracking the right metrics will help you run more profitable campaigns, scale smarter, and avoid costly mistakes.
