Is ROAS Digital Advertising’s New Display Ad CTR?

Optimizing to the Wrong Metrics is the Industry’s Original Sin

“ROAS is a blunt instrument,” Kiri Masters, Head of Marketplace Strategy at Acadia, is fond of saying.

It’s useful for managing ad spend across channels, but few experts believe it’s a reliable metric of ad performance or an accurate depiction of a brand’s return on investment. And yet it remains the single most used metric to evaluate retail media and other digital ad campaigns.

I won’t argue that ROAS should be completely cast aside as a KPI. But I do think both retailers and brands should incorporate better performance metrics like iROAS if they want to spend their budgets wisely. Otherwise, they’ll commit the same mistake that has plagued digital advertising since its earliest days: optimizing to the wrong metrics.

We’ve Apparently Learned Nothing From Display Ad CTRs

In the early days of display ads, campaign effectiveness was always measured in click-through rates (CTRs). The original promise of digital advertising was interactive ads that allowed you to click-through a buy online, so use of this KPI conformed to the prevailing logic of the time. The only problem was that CTRs had nothing to do with campaign effectiveness.

The 2007 “Natural Born Clickers” study, conducted by Starcom and Comscore, showed that a minority (32%) of internet users ever clicked on a display ad, and an even smaller percentage (16%) accounted for the vast majority (80%) of display ad clicks. More notably, those who clicked weren’t your typical online shoppers of that era, they were the less affluent and less sophisticated internet users.