The marketing landscape has changed a lot over the past few years. Performance marketing has taken center stage. eCommerce brands now focus heavily on low-funnel attribution and measurable results. And one of the key metrics in this shift is Return on Ad Spend (ROAS).
ROAS helps eCommerce businesses determine whether ad spend is actually driving revenue. The formula seems simple—revenue generated from ads divided by ad spend. But in reality, calculating ROAS isn’t always so simple.
And because of these challenges many brands struggle to measure the true impact of their ad dollars.
In this blog, we’ll break down what ROAS is and explore the biggest challenges brands face when calculating it.
Let’s dive right in!
What is ROAS?
ROAS, or Return on Ad Spend, is a key metric in performance marketing. It tells you how much revenue you earn for every dollar spent on advertising. The formula is simple:
ROAS = Revenue from Ads / Ad Spend
In an ideal world, if you spend $1,000 on ads and generate $5,000 in sales, your ROAS would be:
5000/1000 = 5.0
This means you earn $5 for every $1 spent on ads. A higher ROAS indicates better ad performance.
So, what is a good ROAS? It depends on your industry, margins, and business model.
Generally, a ROAS of 3 or higher is considered profitable for eCommerce brands. However, high-margin businesses may aim for 2x ROAS, while low-margin brands might need 4x or more to stay profitable.
Purpose of ROAS
ROAS helps brands identify high-performing campaigns and cut down on ineffective ones. By tracking ROAS, businesses can optimize ad budgets, ensuring money is spent on channels that drive actual sales.
It also helps in benchmarking performance over time, comparing different platforms, and understanding customer acquisition efficiency.
A strong ROAS ensures businesses can scale their marketing efforts while maintaining profitability.
However, ROAS works best when it’s analyzed alongside profit margins, customer lifetime value (LTV), and other key financial metrics.
Why ROAS is Critical for Business Growth
A healthy ROAS allows businesses to scale advertising with confidence. It ensures that marketing spend contributes to actual revenue growth rather than wasted ad dollars.
High ROAS means better cash flow, enabling brands to reinvest in inventory, product development, and customer retention.
It also helps businesses stay competitive. With rising ad costs and changing algorithms, brands that optimize ROAS can outperform rivals.
Additionally, investors and stakeholders look at ROAS as a sign of marketing efficiency and business sustainability. While it’s a crucial metric, relying solely on ROAS without considering overall profitability can be misleading.
Challenges in Calculating ROAS
Customer behavior is very different in theory compared to reality. It’s complex — which makes it difficult to get an accurate number.
Multiple factors influence a purchase, and tracking each one precisely is a challenge.
Let’s explore the key roadblocks eCommerce businesses face when calculating ROAS.
1. Revenue Attribution Issues
Customers rarely buy immediately after seeing an ad. They might browse on Instagram, click a Google ad later, and finally make a purchase after an email reminder. Which channel gets credit?
Attribution models challenges are second to none. They try to assign value to each touchpoint, but they are often flawed.
First-click attribution gives all credit to the first ad a customer interacted with, ignoring later influences.
Last-click attribution does the opposite, discounting earlier efforts.
Multi-touch attribution helps but is still not perfect, as different channels contribute in different ways.
For example, if a customer discovers a brand through a Facebook ad but buys after searching on Google, Facebook’s role might be undervalued, skewing ROAS calculations.
2. Data Fragmentation
Ad data is scattered across multiple platforms—Google Ads, Facebook Ads, TikTok, Amazon, and more. Sales data sits in Shopify, CRM systems, or backend databases.
And looking at ROAS differently without accounting for sales data on different platforms skews the calculations.
When data is siloed, brands struggle to see the full picture. Graas Dashboard can help here by consolidating data from multiple advertising and sales channels, providing more accurate insights. This removes guesswork and allows brands to make data-driven decisions.
3. Time Lag Effects
Not all purchases happen immediately after an ad click. Some customers take days or weeks before converting. However, most ROAS calculations work within short time frames, leading to inaccurate reporting.
Let’s understand this with an example. A campaign that ran in Week 1 initially showed a poor ROAS of 0.8x, appearing unprofitable. However, as time progressed and delayed conversions were counted, the actual ROAS improved significantly. By Week 3, many customers who were exposed to the campaign in Week 1 finally converted, leading to a much healthier ROAS.
Even though the numbers improve over time, by then, budgets and strategies may have already been adjusted based on the cumulative view.
This demonstrates why making quick decisions based on initial ROAS data can be misleading.
4. Cross-Device Behavior
A customer might click an ad on their phone, research on a laptop, and finally purchase using a tablet.
Standard tracking tools often struggle to connect these interactions, leading to incomplete data and lower reported ROAS.
For example, if a customer sees an Instagram ad on mobile but buys later on a desktop, the sale might not be properly attributed to Instagram. This makes certain channels appear less effective than they actually are.
5. Inconsistent Measurement Standards
Every platform has its own way of calculating ROAS. Google Ads, Facebook, and TikTok all report conversions differently.
Some count view-through conversions (when a user sees an ad but doesn’t click), while others rely on direct clicks.
For example, Facebook may show a ROAS of 5.0, while Google reports 3.2 for the same campaign.
Without a standardized approach, comparing performance across platforms becomes misleading.
6. Tracking Limitations
Privacy regulations like GDPR, CCPA, and Apple’s iOS updates (App Tracking Transparency) have significantly reduced the amount of data marketers can collect.
Platforms now restrict tracking cookies and third-party data, creating blind spots in ROAS measurement.
For example, with iOS 14 changes, Facebook can no longer track certain user actions outside its app. This makes it harder to attribute conversions accurately, often leading to underreported ROAS figures.
Tools to Help Calculate and Track ROAS
Accurately measuring ROAS requires the right tools. Here’s what your business needs to ensure what you’re measuring is accurate:
1. Advertising Platforms with ROAS Metrics
Platforms like Google Ads, Facebook Ads Manager, and TikTok Ads automatically track ROAS for campaigns. They provide insights on conversions, cost per acquisition, and revenue generated. However, these platforms only measure ROAS based on their own ads. They don’t account for cross-channel attribution or customer interactions outside their ecosystem.
2. Graas’ Dashboards
For a holistic view, brands need an eCommerce analytics platform that integrates both marketing and sales data. This is where Graas comes in. It connects with all your advertising channels and sales channels, ensuring accurate ROAS tracking across multiple touchpoints.
Key Benefits of Using Graas Dashboard:
Fills Attribution Gaps: Unlike ad platforms that measure only last-click attribution, Graas tracks sales in real-time, linking them back to multiple marketing touchpoints. This provides a more realistic ROAS calculation.
Visual Insights: Grass’ marketing dashboard uses color-coded visualizations to simplify complex data. Marketers can quickly identify which campaigns are driving the most revenue and where ad spend is wasted.
Budget Optimization: Graas doesn’t just track ROAS; it provides budget allocation recommendations to improve returns. It helps brands identify underperforming campaigns and shift resources effectively.
Continuous Tracking & Improvement: With real-time updates, businesses can monitor ROAS trends regularly and make data-driven decisions to enhance performance.
Conclusion
ROAS is more than just a number—it’s a critical decision-making tool for e-commerce success. It helps brands analyze ad performance, optimize budgets, and scale efficiently.
But with challenges like attribution gaps, cross-device behavior, and tracking limitations, getting an accurate ROAS isn’t easy.
Not with Graas. It integrates your marketing and sales data, providing real-time insights, accurate attribution, and budget recommendations to give you better returns.
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