TPE #127: Forget ROAS (7 metrics to track instead)
May 12, 2025Read time: 3 minutes
GM, Miles here with The PPC Edge.
I need to address something that’s been on my mind.
Lately, I’ve seen a lot of braggy posts like:
- "We hit 700% ROAS!"
- “We helped a client get 12x ROAS!"
Nice results… But what does that actually tell you?
Without context, absolutely nothing.
Unfortunately, too many clients and Google Ads Specialists still think a higher ROAS always equals better results.
A high ROAS may look impressive, but without digging into margins, CAC, and volume… It doesn’t say much.
So today, I’m breaking down why ROAS can be misleading — and 7 metrics to use instead that actually move the needle for real business results.
Let’s dive in!
ROAS ≠ Profit.
Clients love seeing a high ROAS.
It looks great on reports and easy to understand ($1 in, $3 out).
But here’s the truth:
- You can have a great ROAS and still be losing money.
- You can have a high ROAS and leave growth on the table.
- A high ROAS might actually mean you’re not spending enough.
Let’s run the numbers with a simplified example:
-
Advertiser A: €10.000 spend, €70.000 revenue → 700% ROAS
Profit margin = 20%, generating €14.000 in gross profit.
-
Advertiser B: €10.000 spend, €40.000 revenue → 400% ROAS
Profit margin = 50%, generating €20.000 in gross profit.
Who’s winning?
Well, sure, it depends on your goals… But to make my point:
Not Advertiser A… Despite having a 700% ROAS, their gross profit is 30% lower than Advertiser B with ‘only’ a 400% ROAS.
Yes, this is a simplified example… Sometimes gross profit isn’t the end goal and you want to maximize revenue… But most clients simply want more profit.
That’s why ROAS by itself is a vanity metric.
If you're only focused on making ROAS go up, you're not telling the whole story…
And you’re almost guaranteed to leave profit and growth on the table.
π© ROAS can be manipulated.
To make things even worse:
Some agencies use high ROAS numbers to make results look better than they really are by:
- Including Branded Search & Remarketing (which typically have a higher ROAS).
- Over-reporting on bottom-of-funnel keywords (same thing).
- Avoiding top-of-funnel campaigns (that typically have more diminishing returns and lower ROAS).
Clients see and get impressed by a great ROAS, but under the hood?
Well, who knows what goes on under the hood…
Could be tons of missed volumes and growth opportunities, low margins, or even flat-out unprofitable campaigns.
7 metrics to track instead of ROAS.
If you want to drive real business results, here are 7 alternatives to measure (and report on) next to ROAS:
1: Gross Profit.
= Revenue – Cost of Goods Sold (COGS)
This is your profit after product costs, but before ad spend or overhead. It shows how much money you actually make from sales — and gives you a solid base for smart scaling.
2: POAS (Profit on Ad Spend).
= Gross profit ÷ ad spend
POAS tells you how much profit you’re making after ad spend — not just revenue.
This can be a great optimization signal for Smart Bidding too.
3: MER (Marketing Efficiency Ratio).
= Total revenue ÷ total marketing spend (all channels)
MER helps you understand the bigger picture, as it accounts for all revenue and all marketing spend, not just Google Ads. This is great to understand the overall performance of your client.
4: Contribution Margin.
= Revenue – variable costs (COGS, shipping, ad spend, etc.)
Contribution Margin tells you how much money from each sale is available to cover your fixed costs and eventually contribute to profit after covering variable costs.
5: Customer Lifetime Value (LTV)
= Average Order Value x avg. amount of purchases over avg. Customer Lifespan*
LTV tells you how much a customer is worth to your business on average over time (not just from their first purchase, but from everything they’re likely to buy in the future. This allows you to justify higher CPAs that might be unprofitable on the first order, but profitable on repeat orders.
*Pro-tip: expressing your LTV in terms of Lifetime Gross Profit paints a clearer picture than Lifetime Revenue (which doesn’t say anything about profitability)
6: Blended (n)CAC ([New] Customer Acquisition Cost).
= Total marketing & sales spend ÷ total (new) customers acquired
This shows you how much it costs to acquire a (new) customer across all channels.
When you stack this against LTV, you instantly know whether you're scaling profitably or not.
7: LTV:CAC Ratio
= Lifetime Value ÷ Customer Acquisition Cost
And now for the holy grail of performance marketing: the LTV:CAC Ratio.
You’re essentially asking: "For every dollar I spend to acquire a customer, how much revenue or profit do I get back over time?”
It exposes if your business model is sustainable and scalable, or not.
Now, don’t get me wrong — ROAS isn’t bad by default...
It’s a fantastic diagnostic metric. It helps you place the right bids, compare campaign performance, and monitor trends over time.
But ROAS on its own? It’s incomplete.
Without context — like your profit margins, CAC, LTV, and growth goals — it tells you very little about actual performance or business impact.
That’s why we need to go deeper:
- Stop reporting on numbers without context.
- Paint the full picture with more data points like POAS, MER, and LTV:CAC.
- Use ROAS as a diagnostic metric, but educate your clients on what truly matters.
Quick Recap:
- ROAS doesn’t tell the full story — context is everything.
- High ROAS can signal under-investment, not success.
- You might be missing profit or growth opportunities.
- Track and report on POAS, MER, and LTV:CAC to maximize scale.
- Stop sharing numbers without context just to impress unknowing clients.
Last note: if you’re serious about taking your Google Ads skills, results, and career/business to the next level, consider joining The PPC Hub.
Inside, you get access to our step-by-step Google Ads Success Path program, that takes you by the hand with a proven system to master what it takes to drive maximum results in minimum time.
If that sounds interesting, feel free to join us and 2.000+ experienced Google Ads Specialists here (or check out the video below to see what our members say).
And that’s all for today — thanks for reading.
Catch you next week!
Cheers,
Miles (& Bob)
