Question · Paid ads
Does ROAS matter for e-commerce ads?
Asked by someone on a client's team · Answered by Nathan Frater ·
The short answer
Not much. I barely look at in-platform ROAS, because it's so often inaccurate. I judge ads on whether we're inside our target CPA, what MER is doing across the whole business, and whether the content is getting better.
If you try to optimise for ROAS, you’re optimising for the hardest thing in the funnel to quantify. So I spend my attention on the numbers I can trust.
The rule for scaling is simple. If we’re inside our target CPA, we scale. MER, your total revenue against your total ad spend, tells me whether the marketing is working for the whole business, which matters more than what one platform says about itself.
The bigger reason is lifetime value. I want to buy customers, and I want to make sure one customer buys 10 times. The game is getting someone to their third or fourth purchase, because that’s where the money is.
ROAS mostly measures first-time buyers trying you out. If your brand has strong repeat purchase, it will undersell what your ads are really bringing in. A customer who costs you a bit more upfront and then orders again and again is a great buy, even if the first-order ROAS looks ordinary.