Why do we use ROAS and not profit for Digital marketing?

Return on Advertising Spend (ROAS) is a metric commonly used in digital marketing to measure the effectiveness of advertising campaigns. It is calculated by dividing the revenue generated from the campaign by the cost of the campaign. The result is a ratio that indicates how much revenue is generated for every dollar spent on advertising.

The reason why ROAS is used instead of profit is that ROAS provides a clear and easy-to-understand measure of the effectiveness of a campaign, while profit can be influenced by many factors beyond just the campaign cost and revenue. Profit is influenced by a range of other expenses such as production costs, employee salaries, rent, taxes, and other overhead costs. In contrast, ROAS is a straightforward measure that focuses only on the advertising cost and revenue generated. It will not give you a true picture of the profitability of your business. 

Additionally, ROAS provides real-time feedback on the performance of an advertising campaign, enabling marketers to make adjustments to their strategies as necessary. By using ROAS, marketers can quickly determine whether a campaign is generating a positive return on investment (ROI) or not, allowing them to optimize their advertising spend to achieve their desired results. This do not mean you are profitable overall and can cause issue when you try to scale your business. 

That being said, while ROAS is a valuable metric in evaluating the effectiveness of digital marketing campaigns, it should not be used in isolation. It’s important to consider other metrics such as customer lifetime value, conversion rates, and customer acquisition costs to gain a holistic view of the impact of marketing efforts on the overall profitability of a business.

If you do not know the profitability of your online business then you should take a trial of Hellihub, which will give you not just ROAS tracking but true profit data.