Why ROAS Is the Wrong Optimization Metric

By Thomas Hopkins | February 17, 2023

Thomas Hopkins was first featured as a Mobile Hero in 2018. At the time, he was deep into marketing social casino apps at Penn Interactive Ventures. Since then, he has led the passenger acquisition strategy at Lyft pre-IPO, led performance and lifecycle marketing at the ever-popular MasterClass, and started a performance marketing consultancy.

Learn more about Mobile Hero Thomas.

“The more things change, the more they stay the same.” – Jean-Baptiste Alphonse Karr

When Jean-Baptiste Alphonse Karr wrote this oft-quoted proverb in 1849, he meant that the impacts of turbulent, short-term changes are not reflected in the long-term status quo. True to society, Karr’s statement also accurately describes the current mobile performance marketing space. When there’s a shift in the industry, it can be a game-changing moment. But when you zoom out and look at trends and themes over a two-to-four-year horizon, you start to see that the status quo still holds.

Marketing channels, growth methods, and metrics all share the same theme. Success is about rapid and sustainable shareholder growth, and for many marketing leaders, this means holding steady when things are changing. 

For instance, the introduction of iOS 14.5 underscores the need to make short-term changes to maximize scale and profitability and adapt to new rules. But adapting means seeing that the overall status quo is also changing. We need a team and a system in place to adapt to long-term change. Change is ongoing, and the teams that can pivot quickly will almost always win.

Today I dive into how things have changed for creative and what that means for how growth and creative teams should be structured. But before we get to the insight part,  I want to explain the context of recent changes. This will help you understand what I am about to share.

Pre-iOS 14.5 Campaigns and Deep Funnel Events 

Pre-iOS 14.5, advertisers had more purchase and conversion events to pass to network partners. Advertisers could optimize campaigns based on their own purchase events and purchase events from other advertisers. Networks like Facebook, DSPs, and AdNetworks could share robust social data for each individual or IDFA/GAID.  

Essentially each ad served was closer to remarketing rather than prospecting. Ad platforms—FB, Google, DSPs—already knew if a specific IDFA/GAID (device) or unique user had purchased something similar from a competitor. When we optimized for purchases, the platform algo could pull up a database of everyone who bought that item in the past and show them an ad for your product. 

For example, if I started an athletic shoe brand, I might launch a purchased-optimized ad campaign. For every $100 of spend, I would already have 1-2 purchases. It worked this well because shoe ads were being shown to people who had already purchased similar items. Every brand shared pixel and mmp purchase data with all platforms. iOS 14.5 removed this “purchaser retargeting and deep funnel event shared social graph capability.”

Why ROAS Is No Longer the Right Metric

When you advertised towards a purchase, and therefore a ROAS target, pre-iOS 14.5, the ad platforms could look at all the metrics in the funnel that led to the eventual purchase and compare those metrics to other advertisers with competing products for each user. So, because that comparison could happen across advertisers, you could get away with only paying attention to the ROAS number for each creative. However, now that the ad platforms can no longer make that comparison, when you analyze your creative, you can no longer just look at ROAS. Instead, you should look at the components of ROAS to see if there are opportunities that you are missing. You must look at CPM, CTR, and CVR for every creative. By only looking at ROAS, you don’t see when you have an ad with a great CTR. And an ad with great CTR and similar CPM should be considered an opportunity to scale if you update your landing page or AppStore experience.

Why CTR Matters More Post-iOS 14.5

Now, post-iOS 14.5 advertisers no longer benefit from each other post-click. They only benefit from the click data of other advertisers. And advertisers are competing more so on the CTR than before. This means we need to have ads that are extremely contextual and obvious about what we are selling while also having the ability to win against other advertisers on CTR. When ad platforms lost the quantity of post-click data, they updated their algorithms to rely more on events they still have a lot of data for—the click and the information in the ad. 

Ad platforms have recreated their social graph to reflect what the user clicked on. To take up my earlier example, if a user clicks on a Nike shoe ad and Tom’s shoe ad, the platform should also show this user your ad. However, if your creative and ad copy does not indicate that you are selling a shoe—and the pixel doesn’t have the attribute of shoe for sale in the purchase description—then your ad will be less likely to appear to this specific user. You need to show the product in the ad and have high CTR to show your ads to the people most likely to purchase. But how?

How Do I Increase My CTR?

We have to start at the top of the funnel and design our creative for better clickthrough rates. This means writing copy that is both easy to decipher and enticing. Follow the same logic for your visual creative. 

I headed up performance and lifecycle marketing Masterclass, so for this, I will use a hypothetical Masterclass creative as an example. Pre-iOS 14.5, an ad to promote a Masterclass with Gordon Ramsey might be an image of Gordon cooking scrambled eggs. The copy would say, “Learn to make the best Scrambled eggs.”  

Post iOS 14.5, the creative needs to pull you in much more. The same image would work, but the copy should be more like “Make the best scrambled eggs in under 5 minutes” or “Gordon’s 5-minute scrambled egg secrets revealed.” By doing this, you’ll get more clicks. Network algos will see this as a “good ad,” and it will be more likely to get first fill in the auction, and your ad will likely be shown to higher-value users. 

But what about CVR?

Marketers reading this might say, “every time I have a creative that has a great CTR, the CVR is bad, so the ROI is bad, and we kill that creative.” My response is—only if you don’t update the funnel. When you have a winning creative, you need to update your funnel to capitalize on the users who have shown interest. 

The reason high CTR ads have poor CVR is because the funnel isn’t built for that creative. Imagine waking down the street and seeing an acrylic electric guitar that catches your eye. But when you enter the store, there are only traditional acoustic guitars. You’ll immediately turn around and walk out. This happens when your funnel does not align with your ad. Update your landing page or AppStore creative to align with that winning creative. This will make your new creative scaleable. 

Now let’s combine CTR and CVR

We need high CTR to win in the ad auction and a funnel that supports the high CTR Ads to convert users. So let’s supercharge the system by only having high-intent customers click the ads. 

High-intent users are more likely to purchase the items you offer on your site or in your app. To drive these users, try adding the price to the ad copy. Advertise the fact that there is a free trial or items available for sale to enhance the experience.

In summary, the rules of the game have changed. Performance marketers need to consider the entire customer journey like product and brand marketers. By combining creative with high CTR and a funnel that supports them, you can design a winning creative system that can scale efficiently.