ROAS is a vanity metric (and what to measure instead)
ROAS tells you the ratio of revenue to ad spend. It tells you nothing about profitability, payback period, or business health. Here's the framework we actually use.
ROAS — return on ad spend — is the metric that marketing teams live and die by. Platforms optimise for it. Agencies report on it. CFOs ask about it in quarterly reviews.
It is also almost entirely useless as a measure of business health.
The problem with ROAS
ROAS measures the ratio of attributed revenue to ad spend. A ROAS of 4× means for every $1 you spend on ads, you get $4 back in attributed revenue.
Three problems:
First, attribution. ROAS depends entirely on your attribution model. A last-click ROAS of 4× can mean a data-driven ROAS of 2.1× — same campaigns, different model. Which one's real? Neither, exactly.
Second, margin. A product with a 10% margin and a 3× ROAS is losing money. A product with a 60% margin and a 2× ROAS is printing it. ROAS doesn't know the difference.
Third, time horizon. Subscription businesses, professional services, anything with a long LTV — optimising for ROAS is optimising for the wrong moment. You want first-year revenue, not 30-day revenue.
What to measure instead
The metrics that actually predict business health:
**MER (Media Efficiency Ratio)**: Total revenue ÷ total media spend. Not channel-attributed — total. This is the only attribution-model-neutral revenue efficiency metric. It's imprecise by design: it captures the whole system.
**Blended CAC to LTV ratio**: What does it cost to acquire a customer, and how much are they worth over their lifetime? A CAC:LTV ratio below 1:3 is worth interrogating. Above 1:5 suggests you're under-investing in acquisition.
**Pipeline velocity**: How long does it take a prospect to move from first touch to closed deal? This catches problems that revenue metrics miss — a pipeline that's growing but slowing is a problem that won't show up in ROAS for 6 months.
**Payback period**: How many months of margin until you recoup the acquisition cost? SaaS benchmarks suggest 12–18 months is acceptable. Under 12 is usually a sign to invest more aggressively. Over 24 requires a conversation about unit economics.
We still track ROAS because clients need to see it and platforms report on it. But it's a dashboard metric, not a decision metric.