ROAS is a vanity metric — what we report on instead

Every agency report leads with ROAS. It is the number Meta and Google show first, it is easy to explain, and it usually goes up and to the right in a deck.

It is also the number that most often lets a brand grow revenue while losing money. Here is why we stopped leading with it, and what we put on the first page of our Friday review instead.

What ROAS actually measures

ROAS — return on ad spend — is revenue attributed to ads ÷ ad spend. A ROAS of 4 means the platform credits ₹4 of revenue to every ₹1 spent.

Three words in that definition do a lot of work:

• Revenue, not profit. A ₹1,000 order on a product that costs ₹700 to make and ship is not the same as one that costs ₹300.
• Attributed, by the platform that is selling you the ads. Meta and Google each claim credit for the same order if the customer touched both.
• To ads — including customers who already knew you and would have bought anyway.

Five things ROAS hides

1. Margin. ROAS treats a 20%-margin SKU and a 60%-margin SKU identically. Scaling the "best ROAS" campaign can mean scaling your least profitable product.
2. Returns and RTO. The platform counts the purchase, not the delivery. In India, cash-on-delivery refusals and returns can remove a meaningful share of attributed revenue weeks after the report looked great.
3. Discounts. A sale-week ROAS includes revenue you bought with margin.
4. Double counting. Add up the revenue Meta and Google each report and it often exceeds what actually landed in your bank account.
5. New versus returning customers. Retargeting past buyers produces beautiful ROAS. It also mostly harvests demand you already created.

What we report instead

MER — marketing efficiency ratio

Total revenue ÷ total marketing spend, across all channels, for the same period, using your own order data. It cannot be inflated by overlapping attribution, and it answers the question founders actually have: "When we spend more, does the business make more?"

Contribution margin after marketing

Revenue minus product cost, shipping, payment fees, returns and RTO, discounts — and marketing spend. This is the money left to pay salaries and rent. If it is shrinking while ROAS rises, the ads are buying the wrong revenue.

New-customer CAC against first-order margin

Total marketing spend ÷ new customers acquired. Compare it with the contribution margin of a first order. If CAC is higher, you are relying on repeat purchases to break even — which is fine, as long as you know it and your repeat rate supports it.

Payback period

How many weeks or months until a new customer's cumulative margin covers what it cost to acquire them. Short payback means you can scale spend with confidence. Long payback means growth needs cash.

Find your break-even ROAS before you look at any report

Break-even ROAS = 1 ÷ contribution margin before marketing.

If a ₹1,000 order leaves ₹400 after product, shipping, payment fees and expected returns, your margin is 40% and your break-even ROAS is 1 ÷ 0.4 = 2.5. A campaign at ROAS 3 is making a little money. A campaign at ROAS 2 is losing ₹200 on every ₹1,000 order, however good the chart looks.

Work this out per product line. It changes which campaigns deserve more budget more often than any creative test.

So should you ignore ROAS?

No — just use it for the job it is good at. ROAS is a fine way to compare campaigns, ad sets and creatives inside one platform, because the attribution bias is roughly the same across them.

It is a poor way to decide how much to spend in total or whether marketing is working. For those questions we use MER and contribution margin, and we put them on the first page of every report.

If your current reports lead with ROAS and you are not sure whether the business underneath is profitable, send us a brief. The first thing we will ask for is your margin by product line.