We Need to Talk About Your ROAS

Hey Founder,

We need to talk about ROAS.

I think it is actually one of the most misunderstood numbers in eCommerce: It stands for ‘Return on Ad Spend’, but what does it actually tell you?

It’s the metric everyone brags about.
"5X ROAS!"
"10X Black Friday return!"
It sounds impressive… until you dig deeper and realise it tells you almost nothing about real profitability or sustainable growth.

Today I want to break down what ROAS actually is, why it’s flawed, and which numbers you should be tracking instead if you want to scale your eCommerce brand profitably.

What is ROAS?

ROAS (Return on Ad Spend) = Revenue generated from ads ÷ Ad spend

So, if you spent $1,000 on Meta ads and made $4,000 in tracked revenue (Meta calls that ‘Conversion Value’), your ROAS is 4X.

Why it's flawed:

• It only counts what the Meta or Google platform says it drove — which is increasingly inaccurate post-iOS14.

• It doesn’t account for your actual costs — like product, shipping, team, or overhead. A good ROAS for you might be terrible for another business with different margins and lifetime value.

• It ignores other channels (email, organic, repeat customers) that may have contributed.

At the end of the day - I would go so far as to say ROAS can be a vanity metric.

We’ve seen Meta claim 4X ROAS while the brand was losing money hand over fist. Because that ROAS number is just one part of the story.

📊 What You Should Track Instead

I want to introduce you to blended CAC and contribution margin — two metrics that actually reflect how your business is performing.

🧮 Blended CAC (Customer Acquisition Cost)

Blended CAC = Total marketing spend ÷ Total new customers acquired (across all channels).

This includes Meta, Google, influencers, email, your freelancer… the whole picture.
And it’s way more honest than trusting Meta’s "new customer" label.

Why it matters:
If you’re aiming for profitable growth, you need to know what it really costs you to acquire a customer. Not what Meta says it costs — what it actually costs when you look at your total spend and total new buyers.

Example:
You spent $30,000 across all marketing efforts in April and acquired 1,000 new customers.
Your blended CAC = $30.

💰 Contribution Margin

Contribution Margin = Revenue – Variable costs (COGS, shipping, discounts, fulfillment, and Ad spend).

Contribution Margin is what’s left to pay for your fixed costs (team, software, office) and eventually become profit.

Why it’s powerful:
It shows you what percentage of each order you actually keep — and therefore how much you can afford to spend to acquire a customer.

When I start working with a new client or mentee, I always start with these two numbers before touching the ad account. Because you always don’t need higher ROAS, or more revenue — you need profit!

🎯 So What Should You Do?

1. Track your blended CAC weekly or even daily — not just platform ROAS

2. Calculate your contribution margin — how much is actually left once you pay for product and ads?

3. Use ROAS in specific ways — when you are hitting your target CAC and happy with contribution margin, see what your Meta or Google platform numbers are saying - this is likely the ROAS you need to aim for.

Final Word

ROAS might make you feel good.
But blended CAC and contribution margin will keep your business alive.
They’re what help you scale profitably — not just with vanity metrics.

I recorded a video breaking this all down over on my new YouTube channel — go give it a watch and drop me a comment with your biggest takeaway.

x Jessie