ROAS has long been the most common performance metric in commerce media. It is easy to calculate, easy to communicate, and offers a clear efficiency signal. But anyone managing commerce media investment today knows that ROAS alone does not tell the whole story.
NB: This is an article from Koddi
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Commerce media advertisers today demand more comprehensive, robust, and transparent metrics beyond ROAS alone. And while we often hear about terms like incrementality and full-funnel measurement, those frameworks can be hard to operationalize across media channels.
Though we know ROAS alone isn’t cutting it, without a solid replacement or addition, there doesn’t seem to be anything better…or is there? As the GM of a retail media network, I’ve learned that the key isn’t to abandon ROAS altogether, but to complement it with additional metrics that offer a more complete view of how much budget is appropriate for each brand or product.
To explain how these metrics work together, I want to use an analogy. Believe it or not, growing sales in commerce media is a little like running a farm: just think of sales as your crops, ad spend as irrigation (water), and the campaigns as an irrigation system.
If you were to ask any farmer, “how much water should I put on my crops?” the answer will almost certainly be, “it depends.” The farmer will want to know several things: what are you growing, where is the field, how big is the field, and so on.
Similarly, when a brand asks “how much should I spend on commerce media network x?”, there are a few things you need to know to answer that question the right way. Like in farming, a combination of adequate input/investment and efficient management leads to the biggest yield.
In farming, inputs like water, fertilizer, weather, and time determine whether your crop thrives. In commerce media, that balance comes from ad spend and efficiency, as measured by three key metrics: ROAS, TACoS, and category share.
1. ROAS: Measuring efficiency in your irrigation system
If your irrigation system delivers water efficiently, your crops thrive and you don’t waste water trying to get it to the plants. That is what campaign ROAS tells us in commerce media.
