Chances are you’ve seen some changes in your Return on Ad Spend (ROAS) lately. And with the ever-changing privacy landscape, we certainly haven’t seen the end of the upheaval. However, we can pinpoint the changes in ROAS from two main sources…
Because relative ROAS are so critical to optimizing your growth strategy and marketing budget, it is important to understand that these are different. As a result, it is important to adjust your reported return on ad spend (or measured return on ad spend) accordingly in order to arrive at a more accurate return on ad spend.
Platform Differences
Each ad platform is different and has a different level of accuracy when it comes to measuring (or attributing) conversions. Google may have a 90% accuracy, while other platforms such as Facebook may have closer to a 60%-80% accuracy. This can differ for each individual scenario so it is important to get as close to an idea as possible.
To better understand why let’s run through a quick hypothetical.
Let’s say our reported ROAS and Measurement Capture rate are as follows for two platforms:
If we were basing our strategy and budget allocation on our reported ROAS, we would allocate the majority of our budget to Platform B with the higher ROAS.
However, if we account for the measurement error things shake out differently:
In this case, we are accounting for the fact that Platform A was less likely to attribute a conversion to an impression and we can estimate the true ROAS by dividing the reported ROAS by the capture rate. Using our true ROAS we arrive at an entirely different strategy and budget allocation. We may invest more in Platform A, or at least take a more balanced approach between the two platforms.
What is “True” anyway?
“True” ROAS are referring to the resulted ROAS that take into account both the reported ROAS and the capture rate to produce a more accurate number. While “true” ROAS may never be able to reach 100% accuracy, we can leverage a couple of things to get numbers that are more accurate than what is reported:
Optics
If you were to ignore everything we’ve suggested you would see:
Here lies a problem. In this case, an old adage is spot on.
“Be careful what you measure, you just might get it”
As a business owner, marketing manager, or stakeholder responsible for actual growth, it is critical to get other stakeholders fully aligned. We suggest taking it in steps:
Hopefully, by implementing these steps you will start to see positive change in your ROAS and in turn increase revenue! Contact us at Indra Intelligence and we can help you achieve this!