Return on Ad Spend (ROAS) has become the most important metric for digital advertisers. But using ROAS as your main KPI leads to problems down the way. This article shows why focusing only on ROAS hurts long term business growth and what you should do instead.
Why Everyone Uses ROAS
ROAS became popular because it gives quick, clear results that business owners can understand. Big advertising platforms like Google Ads and Facebook make ROAS easy to see in their reports. This creates a cycle where marketers focus more and more on immediate sales.
ROAS works well because it offers three main benefits:
- Quick feedback on campaign performance
- Easy way to compare different marketing channels
- Simple story to tell executives about return on investment
But these short term benefits hide bigger problems that get worse over time. Being able to track almost everything also inevitably leads to a kind of frenzy. Everything must have a direct positive ROAS, even the smallest detail must be measurable.
The Technical Problems with ROAS
Attribution Window Limits
ROAS first approaches typically operate on weekly or monthly cycles and measure sales within short attribution windows of ad clicks, creating significant measurement blind spots for longer customer journeys. While platforms like Google Ads offer extended attribution windows up to 90 days, most businesses stick to shorter periods due to operational reporting habits and month to month optimization cycles.
This narrow measurement window systematically undervalues upper funnel activities that introduce prospects to your brand. When awareness campaigns generate conversions outside these attribution windows, they receive zero credit while bottom funnel activities capture inflated performance scores. The result is budget reallocation away from essential brand building toward immediate conversion tactics, creating a dangerous cycle that prioritizes existing demand over generating new demand.
Audience Pool Contraction
ROAS optimization makes marketers target existing customers and people ready to buy because they convert faster. This strategy creates diminishing returns as available audience sizes shrink over time.
Competition intensifies for these limited high value segments, driving up acquisition costs. Meanwhile, broader prospecting efforts receive reduced investment, limiting new customer acquisition and overall market share growth.
Short Term Performance Bias
ROAS measurement favors activities with immediate payback cycles, systematically undervaluing longer term brand building investments. Awareness campaigns and new channel testing receive lower priority despite their strategic importance.
This creates tactical optimization at the expense of strategic positioning. Marketing efforts concentrate on converting existing demand rather than generating new demand, limiting sustainable growth potential.
How ROAS First Strategy Hurts Long Term Performance
Market Position Gets Weaker
Using ROAS as the main goal creates predictable problems that compound over time. Business becomes overly dependent on shrinking customer groups while competitors gain market share by investing in broader acquisition strategies. The brand becomes weaker without proper investment and has to compete more on price rather than value.
Operational Problems
ROAS optimization creates operational constraints that limit marketing effectiveness. Too much dependence develops on performance marketing channels while brand focused advertising and messaging receive inadequate testing and investment. This leads to insufficient top of funnel marketing that feeds the entire customer acquisition system.
POAS as a Better Option
Profit on Ad Spend (POAS) might be better than ROAS because it looks at actual profit instead of just revenue. POAS considers how much profit each product makes when deciding where to spend ad money.
Why POAS Works Better
Profit focused decisions: POAS helps you spend money on products that actually make money, not just products that sell a lot. High profit products get the attention they deserve even if they don’t have the highest sales.
Better product mix: Campaigns can focus on making profit instead of just volume. This stops you from promoting products that lose money but make ROAS look good.
Real customer value: POAS shows the true value of getting new customers by looking at actual profit per customer.
Why POAS Is Hard to Use
But POAS has serious challenges that make it difficult to implement:
Need better data systems: POAS requires tracking profit margins for every product, accurate cost accounting, and real time margin updates. Most companies don’t have the systems and infrastructure needed for this.
More complex operations: Unlike ROAS, POAS needs marketing, finance, and operations teams to work together constantly. Product price changes, supplier cost changes, and inventory issues all affect POAS numbers.
New optimization risks: POAS can create its own problems, like focusing too much on high profit products while ignoring customer acquisition volume or market share growth. Overoptimizing on profit can also lead to shrinking volume, which can lead to further issues down the path if not done correctly.
While POAS is more sophisticated than ROAS, it’s still mainly a short term metric that needs to be balanced with longer term business goals. When implementing POAS marketers should also consider the implementation cost and risks. POAS is an alternative approach but no one-stop solution to replace a ROAS first approach.
A Better Way to Think About Marketing
Use Multiple Metrics
Create measurement systems that go beyond ROAS to include customer lifetime value over 12 and 24 month periods. Track market share and competitive position alongside brand awareness and consideration metrics. Monitor new customer acquisition rates and retention to get a complete picture of marketing performance.
How to Split Your Budget
Use a portfolio approach for spending that balances immediate performance with long term growth. Allocate roughly 70% to performance marketing, 20% to brand building activities, and 10% to testing new ideas and channels. Adjust depending on your current performance and market development. Use customer lifetime value calculations to determine appropriate bidding levels for new customer acquisition rather than relying solely on immediate ROAS targets.
Better Attribution Methods
Implement more advanced measurement approaches that capture the full customer journey. Use machine learning attribution from advertising platforms where available and complement this with statistical analysis to measure brand building activities. Run testing with control groups to understand the real incremental impact of your marketing efforts.
How to Make These Changes
Making this transition requires a systematic approach across four key phases. First, fix your measurement infrastructure by setting up multi touch attribution and customer lifetime value tracking before changing your optimization approach. Second, gradually rebalance your portfolio by moving 15% to 25% of performance budgets toward upper funnel activities that take longer to show results.
Third, implement advanced optimization by starting to use customer lifetime value based bidding and profit optimized campaign structures. Finally, establish systematic testing protocols for new channels, audiences, and creative approaches that operate outside traditional ROAS constraints and allow for longer optimization periods. Use marketing mix models to challenge your current setup and help with strategic decisions.
Final Thoughts
ROAS is still useful for day to day optimization, but using it as your main strategy creates problems. It leads to not investing enough in long term growth activities. Performance marketers need to move beyond single metric optimization toward balanced measurement that includes customer lifetime value, brand strength, and market position. This can be scary because a high ROAS is was a strong argument for performance marketers to support their work and validate them. But no business can survive just by working on a high ROAS.
Making this change requires better measurement tools and getting the whole organization focused on longer term success metrics. But accounts that successfully use balanced optimization show much better long term performance and competitive strength compared to those that only optimize for ROAS.
Success in modern performance marketing needs both technical precision for short term optimization and strategic vision for sustainable growth. Pure ROAS optimization cannot provide both.
