(with all due apologies to the horde of philosophers protesting outside my doorstep right now).
One of my pet peeves in growth marketing is how loosely the phrase ROAS (or return on ad spend) is bandied about. In some groups/communities, a 2x or 4x or 8x ROAS is offered as proof of how amazing a campaign is – without any further context.
The problem? ROAS is very very contextual – and makes sense ONLY when the context is clear and specified. There are 3 key contextual dimensions on which ROAS is meaningful.
1. User context:
The kinds of users you are measuring the ROAS for is critical. Your ROAS for re-targeted users is likely going to be higher than that for new users. And even within re-targeted users, your ROAS for a user that is deeply engaged (or made a purchase or added to cart) is going to be different from the ROAS for a user who isn’t nearly as deeply engaged(someone say that’s installed but not registered). At the very least you want to say specify is this is a prospecting audience or a reengaged one.
2. Context of time
Your ROAS makes sense with a specific time frame. Your d1/d7/d30 ROAS are all going to be different. Your d7 ROAS will be different from others’ d30 ROAS.
3. Attribution source/method
Your ROAS is dependent on the attribution source & method. Your ROAS based on 1 day view 7 day click is going to be very different from ROAS based on just a 1 day click, or a 7 day click. Likewise if you’re using ROAS as reported by a self-attributing network(Facebook or Snapchat, say), it’s going to be very different from that reported by a third party attribution provider.
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Sometimes of course some of the context is assumed if your audience is familiar with this context -> if for instance you always report 1 day view 7 day click ROAS, you can omit that if you’re doing just internal reporting.
However, especially when reporting your metrics to someone external (agency, client, partner or acquirer as the case may be), it’s helpful to provide as much context as possible while speaking of a metric such as ROAS.
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