Understanding Ecommerce KPIs

Is ROAS the right metric for RMNs? Retail Media Networks (RMNs) have outgrown their early days when untapped demand meant every dollar spent was both high-ROAS and high-incrementality. Today, focusing solely on ROAS incentivizes behaviors that may appear efficient but harm long-term profitability and growth. Here’s how ROAS can be gamed—and why it’s problematic: 1️⃣ Over-spending on Retargeting or Brand Keywords. These tactics drive high ROAS but focus on customers who were likely to convert anyway, resulting in low incremental growth. 2️⃣ Discount-Driven Sales. Discounting boosts ROAS by generating short-term revenue but lowers margins, attracts low-LTV customers, and conditions buyers to expect promotions. 3️⃣ Cutting Spend on High-Incrementality Campaigns. Investing in new customer acquisition or brand building may have lower ROAS but drives long-term growth and quality customer cohorts. These behaviors lead to: ⛔️ Shrinking new customer cohorts. ⛔️ Increased reliance on discounts, reducing margins. ⛔️ Lower customer lifetime value (LTV) and diminished profitability over time. In essence, chasing ROAS at all costs leads to slower growth and declining margins—a losing combination for any business. Efficiency metrics like ROAS are necessary but must be balanced with an effectiveness metric that focuses on long-term outcomes. For example: ✅ 180-Day Contribution LTV: Measure the total revenue contribution from full-price customers acquired over six months. ✅ Incremental Revenue from Non-Brand Keywords: Track revenue generated from truly new demand sources. ROAS is an excellent efficiency metric but a poor north star. Striking the right balance between efficiency and effectiveness will ensure your business scales sustainably while maintaining margins. Keen to hear what other metrics are used for RMNs #advertising #media #tech

On the 10 year journey to Chubbies’ IPO, the realization that changed how we invest marketing resources was this --> Increasing ROAS * decreased * our growth. btw, I was the world’s largest ROAS (AKA Return on Ad Spend) fanboy for embarrassingly too long, but hey, my loss is your gain, so here's: 1. Three counterintuitive things I learned about ROAS 2. Two new ways to think about it 3. Three things you can do about this right now let's do it. ** Three counterintuitive things I learned about ROAS ** 1. “ROAS has been presented as a growth metric, when it’s actually anything but. In fact, ROAS is precision-engineered to keep brands small,” says Tom Roach. Chasing ROAS chases easy sales, not growth. Brand growth comes from light buyers, but focusing on high ROAS can lead to you targeting heavy buyers, therefore limiting growth. 2. ROAS is not actually a measure of *effectiveness* but how *efficiently* you achieved it. As Les Binet says: “Effectiveness first, efficiency second.” 3. Simply put, ROAS is the opposite of incrementality. ** Two new ways to think about it ** 1. It's like hiring an employee to stand just inside the entrance of your shop and tap shoppers on the back as they enter. A week later, the employee demand a raise, claiming credit for all the customers they’ve “enticed” to come in. 2. Imagine a soccer coach believing their forward is entirely responsible for every goal. As a result, in their infinite wisdom, they ditch their defense and midfield, only keeping their center forward. They end up losing every future game, but their “Goals Per Player” (the ROAS of this example) is higher than ever! ** Three things you can do about it right now ** 1. Vanity VS Value: Understand the negative externalities of the metrics we goal our teams on. For example, because many of us are seeing headwinds, brands either cut marketing spend or increase the ‘accountability’ of the dollars spent. The negative externality is that we're over-harvesting our existing customers in order to hit our numbers. ROAS and revenue from returning customers may be up (vanity metrics), but contribution dollars, share of search, and new customer revenue from unpaid sources (real business metrics) are likely down. 2. Party & Ponder: Spend half a day with your team and deeply consider the metrics you want to optimize your team’s efforts around in 2024. The whole team needs to take ownership of the metrics that matter AND have a deep understanding of the negative externalities of vanity metrics like ROAS. This is a super high-leverage use of time 3. Cultivate Creativity Completely (the 3C's of winning): Since marketing works by influencing future buyers, think about developing creative that gets noticed and gets remembered. Give your team permission to be bold, put on a show and have a little fun. As John Dawes of the Ehrenberg-Bass Institute says, “The brand that gets remembered is the brand that gets bought." Enjoy

Marketing dashboard showed 4.2X ROAS. Finance team said we were losing money. Both were right. Spent three days digging through every transaction and found the hidden culprit: Our top-performing ad segment had a 72% return rate. Most marketers track acquisition metrics obsessively while completely overlooking what happens after purchase. The true journey: ⤵︎ Customers saw our high-quality images ⤵︎ They impulsively purchased multiple sizes ⤵︎ Kept one item, returned two others ⤵︎ Return processing cost us ₹420 per order Five immediate changes we made: ↗︎ Added detailed size guides with actual measurements ↗︎ Modified creative to show realistic fits on diverse body types ↗︎ Built separate campaigns for repeat customers ↗︎ Integrated CRM data with ad targeting to block serial returners ↗︎ Reworked attribution to account for net revenue after returns Our new dashboard shows actual profit per ad campaign. The first week was sobering - half our "winning" campaigns were actually money losers. But now? Our decisions are based on reality, not wishful thinking. What post-purchase metrics are you ignoring?

I updated my Amazon Ads switchback experiment by incorporating Marketing Mix Modeling to account for ad carryover effects. This increased my ROAS estimate from 1.25 to 1.54—meaning Amazon's platform reporting (2.35) was inflated by 53%, not 88%. Amazon's platform reported 2.35 ROAS—pure fantasy from greedy attribution given the products' high organic rankings. My switchback experiment suggested 1.25—a conservative floor that ignored carryover when customers clicked one day but bought the next. Here's how I combined the methods: The Platform Fantasy (2.35 ROAS): Amazon attributes any sale where a customer clicked an ad, cannibalizing organic revenue that would've happened anyway. The Switchback Floor (1.25 ROAS): My daily On/Off experiment measured real incremental sales. But it penalized ads for delayed conversions—when someone clicked on an "On" day but purchased on an "Off" day. The MMM Structural Insight (0.35 decay rate): Google Meridian estimated ~35% of ad pressure carries over to the next day, confirming the switchback was too conservative. The Triangulated Estimate (1.54 ROAS): I transformed each day's raw spend into "adstocked spend" using the 0.35 decay rate, then recalculated ROAS as Sales Lift / Adstock Difference. This result sits comfortably between the experimental floor (1.25) and the MMM's direct estimates (median 1.42, mean 1.79). The lesson: Experiments give you the causal anchor. MMM gives you the structural parameters. Platform reporting gives you fiction. Truth emerges from triangulating multiple methods. Full methodology with code and visualizations: https://lnkd.in/gbtUQxUN

ROAS = Really Over-estimating Ad Success Here's how to fix it: It doesn't matter how much return your ads make if the sales were going to happen anyway. You need to look at the incremental return on ad spend (iROAS). The 'i' really matters. It means you're trying to measure sales caused by advertising, (using test <> control methodology) rather than just counting sales regardless of causality. Given how much is spent in performance this is probably the single biggest step the advertising industry can take in 2025 to improve effectiveness. Analytic Partners found 35 cents from every $1 spent on advertising is wasted due to optimizing exclusively to last click metrics like ROAS. That wastage is advertisers paying for existing sales. When you're next shown ROAS results ask where's the 'i'? iROAS is just the start. Consider the full picture: - What's the value of incremental sales you're driving? - What's the cost factoring non-media costs (creative production etc)? - What's the cost of goods sold (production, returns etc)? - How much incremental profit are you driving? - What's the long term incremental impact? Incrementality should be non-negotiable in 2025.

After 10+ years of analyzing marketing performance data, I've noticed a (very!) common optimization pitfall. Teams focus solely on Cost Per Acquisition (CPA) while missing the bigger revenue (ROAS) picture. 𝐖𝐡𝐲 𝐂𝐏𝐀 𝐈𝐬𝐧'𝐭 𝐄𝐧𝐨𝐮𝐠𝐡 👉 Different user segments show varying behaviors post-conversion (retention rates, seats per account, cancellation patterns, upselling potential) 👉 Low CPA campaigns might actually generate less revenue than higher CPA initiatives with better ARPU 👉 Subscription products have multiple revenue-generating actions beyond initial conversion 𝐓𝐡𝐞 𝐂𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞 𝐰𝐢𝐭𝐡 𝐓𝐫𝐚𝐝𝐢𝐭𝐢𝐨𝐧𝐚𝐥 𝐑𝐎𝐀𝐒 𝐓𝐫𝐚𝐜𝐤𝐢𝐧𝐠 👉 Multiple revenue events (renewals, plan changes, seat additions) can't be cleanly attributed to original campaigns 👉 Attribution windows often misassign later revenue events to organic or CRM campaigns 👉 Conversion events alone don't capture the full revenue story 𝐓𝐡𝐞 4-𝐒𝐭𝐞𝐩 𝐒𝐨𝐥𝐮𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 𝐀𝐜𝐜𝐮𝐫𝐚𝐭𝐞 𝐑𝐎𝐀𝐒 𝐌𝐞𝐚𝐬𝐮𝐫𝐞𝐦𝐞𝐧𝐭 1️⃣ 𝘚𝘵𝘰𝘳𝘦 𝘈𝘥 𝘗𝘭𝘢𝘵𝘧𝘰𝘳𝘮 𝘚𝘱𝘦𝘯𝘥 - Implement ETL tools (Fivetran, Funnel etc) to store spend data - Create unified view across platforms with daily campaign-level granularity 2️⃣ 𝘊𝘢𝘭𝘤𝘶𝘭𝘢𝘵𝘦 𝘙𝘦𝘷𝘦𝘯𝘶𝘦 𝘗𝘦𝘳 𝘜𝘴𝘦𝘳 - Aggregate all revenue events (subscriptions, renewals, upgrades) - Create comprehensive user lifetime value view - Store in same warehouse as ad spend data 3️⃣ 𝘛𝘳𝘢𝘤𝘬 𝘐𝘯𝘪𝘵𝘪𝘢𝘭 𝘊𝘰𝘯𝘷𝘦𝘳𝘴𝘪𝘰𝘯 - Ensure conversion events link to single touchpoint - Maintain consistent unique identifiers (user_id, campaign_id) - Connect conversion data to revenue tracking 4️⃣ 𝘑𝘰𝘪𝘯 𝘋𝘢𝘵𝘢 𝘚𝘦𝘵𝘴 𝘧𝘰𝘳 𝘈𝘯𝘢𝘭𝘺𝘴𝘪𝘴 - Combine spend, revenue, and conversion data - Create segmented views by market, strategy, audience, keyword - Enable granular ROAS calculation per campaign With this as basis, you can calculate granular ROAS and payback period for your individual campaigns, ads or keywords. Full detailed guide with implementation steps in comments.

Chasing a higher ROAS might be costing you profit. It sounds counterintuitive, but in my work at Google, I often see retail businesses leaving money on the table by setting their Return On Ad Spend (ROAS) targets too high. They focus on maximizing the return from every dollar, but they miss the bigger picture: maximizing total net profit. The obsession with a high ROAS can artificially limit your investment, forcing your campaigns into a narrow auction landscape. You win the most efficient conversions, but you miss out on a huge volume of slightly less efficient, yet still highly profitable, sales. The solution is to find your "profitability sweet spot." Look at the first image below. A client was achieving a 700% ROAS, which looks great on a dashboard. But by strategically lowering that target, we forecasted that a 301% ROAS would increase their total net profit from £137,000 to £467,000. That’s a 240% increase in profit by being less efficient on paper. The second image shows the key inputs needed to find this sweet spot, from your gross margin to fulfilment costs. Stop asking "What's the highest ROAS I can get?" and start asking, "At what ROAS does my business generate the most net profit?" As Black Friday gets closer, make sure you know these numbers. Ask your Google account manager for this analysis. What is your business currently optimising for: high ROAS or max profitability? #AIforBusiness #BusinessStrategy #GoogleEmployee #ROAS #Ecommerce #Profitability

Marketers often talk about ROAS and ROI like they're the same thing. Hint: They're not. Here’s the easiest way to remember: 👉 ROAS = “For every $1 in the vending machine, you got $4 of snacks.” 👉 ROI = “After paying for the snacks, the machine, and the electricity, here’s how much change you actually have left.” Both matter. But they tell very different stories. 🔹 ROAS (Return on Ad Spend) → Efficiency metric. Tied to ad performance only. Makes dashboards look pretty. Doesn’t prove profitability. 🔹 ROI (Return on Investment) → Profitability metric. Includes all costs: product, people, shipping, fees, tools. Tells the CFO if marketing actually made the business money. Benchmarks to keep in mind: E-comm: 4–6:1 ROAS can be great, but ROI must clear 15–30% to be healthy. B2B: Even 1.5–2:1 ROAS can work if lifetime value is high. ROI under 10%? 🚩 Pricing, costs, or channel mix likely off. So, is marketing responsible for ROI? ✅ Yes, if you control the full funnel. ⚠️ Partially, if you only own pieces. 🚫 No, if you just run tactics without influence on sales, pricing, or delivery. The takeaway: ROAS shows how efficiently you generate revenue. ROI shows if you actually profited. If you want smarter conversations with execs → track both. #ROAS #ROI #Marketing #Revenue

Everyone tracks ROAS. Nobody tracks contribution dollars by product. But your "best performing" product might barely break even at the end of the day. And your "worst performing" product might be wildly profitable. But you'll never know if you only look at ROAS. ROAS tells you how efficiently you spent ad dollars to generate revenue. It doesn't tell you: - How much that product costs to make - How much it costs to ship - How often it gets returned - Whether you actually made money I've seen brands kill their most profitable products because the ROAS looked "too low." They couldn't hit their magical 3x target, so they cut it. Meanwhile they're pushing products with amazing ROAS that lose money on every sale once you factor in true costs. Your media buyer isn't wrong to optimize for ROAS, but if you're not also tracking profit margin, you're not seeing anywhere near the full picture. Some brands are scaling their highest ROAS products straight into bankruptcy. Others are sitting on goldmines they refuse to advertise because the ROAS doesn't look sexy enough. The brands that actually make money understand that 1.5x ROAS on a high-margin product beats 4x ROAS on a low-margin product every time.

The case of the missing $10M in ad spend: A customer came to us after their previous data setup showed Facebook ROAS at 4.2x. Their CFO had a simple question: "If our ROAS is that good, where's all the money?" Our audit uncovered: • 37% of conversion data was being double-counted • Revenue attribution windows mismatched (28-day vs. 7-day) • 40% of transactions had no source tracking at all • Returns weren't being factored into ROAS calculations Actual ROAS: 1.8x (not 4.2x) Missing money mystery: Solved ✅ This isn't rare. 3/4 of brands we've audited have attribution discrepancies of 30%+ between platforms. (Klaviyo, I'm looking at you) 👀 In 2025, the most valuable competitive advantage isn't some secret algorithm—it's simply having accurate data your people are aligned on.