ROAS is useful—and incomplete
Return on ad spend divides attributed revenue by advertising cost. It is fast, familiar, and useful for comparing media performance under a consistent measurement model.
But revenue is not profit. Two products with the same selling price and ROAS can produce very different outcomes after product cost, discounting, payment fees, picking, shipping, returns, and other variable costs.
Contribution margin changes the question
A contribution view asks how much value remains after the variable costs connected to an order. The exact definition should match the decisions the company needs to make and remain consistent across teams.
- Start with net revenue rather than an inflated gross-sales figure.
- Include product cost and the variable costs required to process and fulfill the order.
- Treat discounts, returns, and shipping economics consistently.
- Decide explicitly whether advertising cost belongs inside the operating metric being reviewed.
Use both at the right level
Media teams still need channel diagnostics. Operators need a measure that connects acquisition to the economics of products and orders. The better system preserves both views and makes the translation between them visible.