Why ROAS doesn’t matter that much - From a $50M marketer

I’ve worked with a lot of brands in the direct response space and it’s interesting how everyone focuses super hard on ROAS.

ROAS does matter under certain circumstances but let me breakdown when you should pay attention to it, and when you shouldn’t really care about it.

Firstly, a lot of brands look at ROAS when they’re running high ticket funnels where your AOV for your product is $200-$300+. This is one of the most common cases of caring about ROAS. The reason why is because you’re burning so much cash to the point where you need an immediate ROI. But even in this case, I would still argue that CPA holds more weight because if you can control your CPA - your ROAS will regress to the mean. This means your ROAS will improve.

Another scenario where people tend to care about ROAS is when they are running funnels where they have multiple products or multiple upsells. I would say to this that NC CPA is more important because again, your ROAS WILL fluctuate but the one thing you can count on being stable is your CPA.

Now, the only time you should care about ROAS is when adding a target bid. Instead of doing cost cap, test out target ROAS. You’ll notice that your CPA is really good and your ROAS is also really good. In my opinion, ROAS is secondary to CPA.

If you are making optimizations, and an ad has really bad CPA but super high ROAS - keep it on until CPA gets better. This is an example when ROAS matters a lot.

Other than that, new customer CPA is a much better metric to focus on rather than ROAS because CPA directly influences your ROAS.