Return on ad spend is the number every founder asks about first. It is also one of the easiest numbers to misread. Ad platforms grade their own homework, attribution windows overlap, and a campaign can look brilliant in Ads Manager while the bank balance tells a different story.
Three ways ROAS misleads you
- Double counting. Meta, Google and TikTok can all claim the same sale. Add them up and you have sold more than you actually did.
- Retargeting inflation. Campaigns aimed at people who were already going to buy look incredibly efficient, but they create very little new demand.
- Margin blindness. A 4x ROAS on a product with a 20% margin can lose money once shipping, returns and fees are included.
The scorecard we use instead
We still look at platform ROAS, but only as a steering signal. For decisions about budget, we use a short scorecard built from your own store data.
- MER (marketing efficiency ratio): total revenue divided by total marketing spend. Simple, honest and impossible to double count.
- New customer CPA: what it costs to acquire a customer who has never bought before.
- Contribution margin after ads: revenue minus product costs, fulfilment and ad spend. This is the number that pays salaries.
- 90-day customer value: how much a new customer spends in their first three months, so you know what you can afford to pay for them.
Start this week
Pull last month’s total revenue, total ad spend and new customer count into a simple sheet. Calculate MER and new customer CPA. If those numbers surprise you, that is your sign the dashboard has been telling a kinder story than the business.
