Two campaigns, both with a ROAS of 4. One promotes your own label, the other a branded appliance you barely earn anything on. In the report they are level. In your bank account they are not.
What ROAS tells you and what it does not
ROAS divides attributed revenue by ad spend. A ROAS of 4 means: for every euro of advertising there are four euros of revenue from orders that the chosen model attributes to this campaign. How much of those four euros you keep, it does not say. First the cost of the goods comes off, then shipping, payment fees and returns.
The calculation
An example with round numbers, all amounts net: both campaigns cost €2,000 a month and are each attributed €8,000 in revenue. Your own label has a 60 per cent margin on net value, the branded appliance 15 per cent.
| Own label | Branded appliance | |
|---|---|---|
| Ad spend | €2,000 | €2,000 |
| Attributed revenue | €8,000 | €8,000 |
| ROAS | 4.0 | 4.0 |
| Cost of goods | €3,200 | €6,800 |
| Contribution margin | €4,800 | €1,200 |
| Margin ROAS | 2.4 | 0.6 |
| After ad spend | +€2,800 | −€800 |
Contribution margin here is the net value of the orders minus the cost of goods. Margin ROAS divides it by ad spend. Below 1, the attributed orders leave less after purchasing than the advertising cost. That is the case for the branded appliance, even though its ROAS looks just as good as your own label’s.
When a campaign pays its way
The threshold can be worked out. For the contribution margin to cover ad spend, a campaign needs a ROAS of at least 1 divided by the margin. At a 60 per cent margin that is about 1.7, at 15 per cent about 6.7. A single target ROAS for the whole account therefore rarely fits every campaign: for one, 4 is a lot; for the other, it is too little.
Shipping, payment fees and the cost of returns are not in this calculation yet. A margin ROAS just above 1 does not mean anything is left at the end.
What Metrunio needs for it
- Net value and cost of goods per order. The plugins for Shopify, Shopware and WordPress send both, provided the cost of goods is maintained for every line item. If it is missing for one line, that order’s contribution margin stays empty instead of showing revenue as margin.
- Ad spend, from connected ad accounts or imported. Costs come with the Pro plan.
- Then margin ROAS appears under “Commerce & products”, per channel in the overview and per channel and campaign under “Attribution”.
If only some of a row’s orders carry the cost of goods, the figure says what percentage of orders it rests on. The costs are those of the whole row, the contribution margin only that of these orders. With low coverage the figure is therefore too low; the missing part is not extrapolated.
One limit applies to every attributed figure, this one included: margin ROAS says what is attributed to the orders under the chosen model. Whether those orders would have happened without the campaign, it does not say.
From the Growth plan you can also send purchases back to Meta, Google and the other platforms with the contribution margin instead of revenue. If you bid on conversion value there, you are then bidding on what you keep.
À retenir
A ROAS of 4 is a profit at a 60 per cent margin and a loss at 15 per cent. The report shows the same figure in both cases.