Why ROAS Is a Dangerous Success Metric

ROAS is no guarantee of success. A high ROAS can be deceptive when looked at in isolation. Revenue does not equal profit. Companies that optimise exclusively for ROAS risk making losses in the long term – particularly with thin margins. The consequence: wrong priorities, wasted potential and stagnant growth.

If you align your marketing strategy with revenue instead of profit, you optimise short-term – and endanger your profitability long-term. The question is not how high your ROAS is, but what really remains in the end.

This article shows why ROAS often misleads and which metrics give you real control and clarity.

Why ROAS misleads

ROAS may at first glance be a clear and easily understandable metric – revenue divided by advertising spend. But this apparent simplicity masks decisive weaknesses.

Attribution problems in multi-touch customer journeys

Most advertising platforms rely on last-click attribution: the last click before the purchase is counted at 100%. All previous touchpoints – such as the first Google search, a YouTube video or an Instagram post – stay outside. As a result, retargeting and branded campaigns often shine with high ROAS values, while campaigns at the start of the customer journey that arouse interest appear inefficient.

In addition, every platform only captures its own data: Google does not see Facebook interactions, and Facebook ignores offline conversations. It becomes even more problematic with branded search. Here, you often pay for customers who would have bought anyway, since they already knew the company.

Such distortions lead to short-term successes being overrated – a problem that also affects the long-term profit and growth strategy.

Short-term results vs. long-term profit

A high ROAS signals efficiency, but does not automatically mean sustainable growth. The exclusive optimisation for ROAS neglects the opening up of new market segments. Performance marketer Stefan Alexander Mayer sums it up: a high ROAS often leads companies to invest more cautiously. Instead of expanding into new target groups, the budget is put into already well-converting channels. The potential for long-term new customer acquisition remains unused.

Missing Customer Lifetime Value (CLV)

ROAS makes no distinction between one-time purchases and long-term customer relationships, although the latter are significantly more valuable. Leigh Buttrey, Senior PPC Strategist, sums it up:

If you're only looking at ROAS, you'll end up optimizing for more Customer As [one-time buyers]... even if Customer B ends up being worth eight times more.

The concentration on the first purchase leads to budgets being withdrawn from long-term profitable target groups. Instead, investment goes into short-term conversions – with rising revenues, but sinking overall profitability.

Neglected costs and margins

A ROAS of 4.0 means €4 in revenue per €1 in advertising spend. But after deduction of all costs, often little remains. With a margin of 10%, the ROAS would have to be 10.0 to cover all expenses.

An example is provided by LOOKFANTASTIC of THG: despite high revenues through ROAS optimisation, many products contributed negatively to profitability. Only through margin-based evaluation and AI-supported prioritisation could the actual profit in Germany be increased by 39%.

Alongside internal factors, external fluctuations also influence the meaningfulness of ROAS.

Seasonal and market-related fluctuations

ROAS reacts sensitively to external influences. Around Christmas or on Black Friday, purchase readiness rises, which makes ROAS values rise – often regardless of whether the advertising actually triggered the purchase. In quieter months, on the other hand, ROAS sinks, even with the same campaign strategy.

Added to this are data gaps through cookie restrictions and data protection regulations that do not capture all conversions. That makes ROAS additionally unreliable.

How this affects local companies in the DACH region

The methodological weaknesses of ROAS have far-reaching consequences, particularly for local companies in the DACH region. Here it becomes clear how this metric can be not only misleading but also dangerous.

For small and medium-sized companies in the region, the so-called ROAS trap is particularly problematic. A study shows that 50% of companies have not increased their marketing budget compared to the previous year. At the same time,** 59% of CMOs** state that their current budgets are not enough to fully implement their strategies. In such situations, ROAS often becomes the central metric – a risky decision.

A ROAS of 5.0 may at first glance seem impressive, but with thin margins it can mean losses. The reason: ROAS does not take all costs into account, which represents an additional burden particularly for local companies. Tom Roach, VP Brand Strategy at Jellyfish, sums it up:

ROAS appears precision-engineered to keep brands small.

The result? Instead of investing in the acquisition of new target groups, the scarce budget is put into channels that convert anyway. This one-sided optimisation leads to a structural growth problem. Performance marketer Stefan Alexander Mayer warns:

The higher the ROAS, the more skeptical I am to invest... High ROAS or low CPA levels usually indicate that users were converted at a relatively low cost [because they] were likely to convert anyway.

This is the core of the problem: companies confuse efficiency with success and optimise themselves into a dead end. Particularly in economically difficult times, this problem intensifies.

With rising labour costs and employer contributions, companies in the DACH region cannot afford inefficient campaigns. With average marketing budgets of 7.7% of total revenue, every euro invested must create real added value – revenue alone is not enough.

The solution: instead of demanding higher budgets, companies should rely on profit-oriented metrics. Which metrics actually show whether marketing promotes growth? Clearly defined, results-oriented metrics are the key. Without this transparency, ROAS remains a dangerous illusion – particularly for companies that cannot afford expensive mistakes.

Better metrics for long-term growth

Metrics that go beyond mere revenue create the basis for well-founded and sustainable marketing decisions. Instead of short-term experiments, the focus is on profitability, customer value and the adjustment of the budget to campaign performance. POAS and ROI are central control variables here for avoiding structural losses.

Profit-oriented metrics

POAS (Profit on Ad Spend) measures how profitably your advertising budget is actually deployed. In contrast to ROAS, which only looks at revenue, POAS takes into account net profit after deduction of all variable costs such as cost of goods, shipping, returns and payment fees. Frederiek Pascal, founder of ClickForest, sums it up:

POAS stands for Profit On Ad Spend. While ROAS focuses on revenue, POAS goes a step further by looking at profit. This means you no longer optimize for revenue, but for how much money actually remains after all costs have been accounted for.

A POAS of 100% marks the break-even point – everything below means losses. For e-commerce companies, a POAS between 120% and 180% is considered healthy. The conversion requires precise data: sales prices, cost of goods, shipping costs, return rates and payment fees must be exactly documented and transmitted to Google Ads via the Google Tag Manager as "profit_value".

ROI (Return on Investment) goes a step further. It shows whether the entire marketing investment is economical, since it also includes fixed costs like personnel, logistics and overhead.

An example: in 2024, the online beauty retailer LOOKFANTASTIC (part of the THG network) changed its strategy. Instead of relying on ROAS targets, the company relied on AI-supported product evaluation and customer analysis. The result: 39% revenue increase in the German market and 42% growth across several beauty shops in the network. Paid Media Lead Mason Park sums up:

Focusing on our strategically important products led to truly impressive revenue growth.

Customer-oriented metrics

Alongside pure profit optimisation, long-term customer relationships are decisive. Customer Lifetime Value (CLV) evaluates the total value of a customer over their entire relationship with the company. This view justifies higher acquisition costs when the long-term return is right. AttributionApp explains:

A 1:1 ROAS might be fine if you know that customer will generate 4x in revenue over time. But that only works if you can track that LTV reliably.

For fast-moving e-commerce businesses, a one-year view of CLV is recommended in order to avoid miscalculations. CLV data can be integrated directly into value-based bidding in order to bid specifically on high-value customer segments – a clear advantage for strategic planning.

Customer Acquisition Cost (CAC) complements CLV by measuring the actual costs for acquiring a new customer across all channels. Only when the lifetime value exceeds the acquisition costs does sustainable growth arise. Otherwise, additional customers lead to losses.

Growth and efficiency metrics

For a comprehensive evaluation of marketing success, further metrics are relevant. Marketing Efficiency Ratio (MER), also called "blended ROAS", sets total revenue in relation to all advertising spend across all channels. This holistic perspective prevents individual channels from being overrated, and shows how marketing as a whole contributes to growth.

Profit per Impression (PPI) is ideal for top-of-funnel campaigns like YouTube or Display. Here the focus is not on direct conversion, but on the influence on brand perception. PPI shows how much profit every ad impression generates – regardless of immediate clicks.

Incrementality measures the real effect of advertising by isolating conversions that would not have taken place without advertising. Stefan Alexander Mayer warns:

The higher the ROAS, the more skeptical I am to invest... High ROAS or low CPA levels usually indicate that users were converted at a relatively low cost... we can assume that many of the conversions attributed to the channel would have happened organically.

Holdout tests, in which a part of the target group does not see advertising, illustrate the actual advertising effect.

The choice of the right metrics determines what your marketing is aligned with – measurable growth instead of short-term activity.

From metric chasing to strategic planning

Many entrepreneurs see marketing as a reactive playing field, characterised by experiments: campaigns are launched, ROAS is analysed, and budgets are adjusted accordingly. This approach often leads, however, to marketing being perceived as a cost centre – not as a strategic lever for sustainable growth. Sean Bowkett of Salience sums it up aptly:

Real business success means sustainable profits that support your team, not only vanity metrics that look good in reports.

This statement makes clear that marketing must not be looked at in isolation, but as a strategically networked system.

Instead of seeing campaigns as individual attempts, marketing should be planned in a well-thought-out and systematic way. A well-structured marketing master plan or a roadmap dictates how demand creation (addressing new target groups) and demand harvesting (winning purchase-ready customers) are kept in balance. Without this strategic approach, the work often concentrates only on the "warm" 20% of the target group, while the remaining 80% remain unused. Such a plan also creates the basis for aligning bid strategies in a targeted and effective way for different target groups.

A well-thought-out plan also opens up the possibility of using value-based bidding optimally. Instead of trimming Google Ads only for revenue, bids are managed based on Customer Lifetime Value (CLV) and the actual profit margins. That means: higher bids for customer segments with high value and a reduction for target groups with low repeat potential. This kind of management presupposes, however, that it is defined in advance which customers are valuable in the long term – a task that cannot be solved without strategic planning.

To overcome the chase for short-term metrics, a clearly structured approach is needed. Our approach is divided into three phases: Learn and Qualify,** Optimize and Refine**, and** Scale**. Every phase is based on clearly defined target products, precise customer segments and a well-thought-out budget distribution.

At Nordsteg, everything starts with a marketing master plan. This defines target groups, positioning, budget distribution and success metrics – before operational implementation starts. The result: predictable, sustainable results instead of short-term experiments that swallow budgets without creating long-term benefit.

Conclusion

The ROAS (Return on Ad Spend) is no bad metric, but it harbours risks when looked at in isolation. It shows efficiency, but not actual profitability, and can thus give the impression that everything is going well, while in truth profit suffers. Anyone who concentrates exclusively on the optimisation of ROAS runs the risk of scaling in a direction that endangers profit in the long term.

The solution does not consist in ignoring ROAS, but in placing it in a more comprehensive, strategic context. Complementary metrics like POAS (Profit on Ad Spend), Customer Lifetime Value and Incrementality are decisive in order to obtain a complete picture. Leigh Buttrey sums it up aptly:

The advertisers seeing the biggest gains in 2025 aren't just chasing higher ROAS – they're building smarter, more sustainable strategies focused on growth, profit, and long-term success.

This statement makes clear that sustainable success is only possible through a strategically well-thought-out approach.

Anyone who looks at marketing merely as a test laboratory risks investing in campaigns that may impress short-term, but create no real added value long-term. A clearly defined marketing master plan, on the other hand, that clarifies from the start which customers and products are valuable in the long term and how demand creation and demand harvesting are kept in balance, is the key to sustainable results.

Sustainable success arises when growth and profitability are strategically connected with each other. Marketing is no cost factor, but a strategic tool – however only when it is planned systematically and with future orientation.

This is exactly where Nordsteg starts: with a detailed marketing master plan that structures all measures already before operational implementation, and through continuous coaching, a long-term predictable basis is created. This approach makes Nordsteg a reliable partner for sustainable growth.

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