The Incremental Growth Series | Part 1: Why your ROAS doesn’t tell the whole story about growth

Why your ROAS doesn’t tell the whole story about growth

Over the past few years, I’ve had the genuine pleasure of working with paid marketing leaders across industries like Finance, Travel and Retail – digging in with folks that sit across multiple disciplines, media channels and exploring with the nuances and constant evolution that they bring with them.

And there’s a really common thread: Return on Ad Spend (ROAS) is king. It’s the metric on every dashboard, the number that defines campaign success, and the benchmark for performance. And for good reason—it’s a measure that the wider business can understand and support, especially CFOs that are navigating increasingly unpredictable economic conditions, and that are seeking greater efficiency every quarter, every year.

Often though the metric the business is really seeking to achieve and measure is growth, and ROAS is sometimes used as a kind of proxy for marketing’s contribution to that growth.

But is hitting a ROAS target the same as driving growth? Frankly, it’s not.

ROAS might look good according to the ad server – but the story it tells is incomplete, either because it’s being viewed in isolation for specific media channels, or because it’s often missing large audiences you can’t actually see due to a lack of identity signals in certain environments. These limitations, coupled with the fact the business is really trying to achieve growth, are why ROAS is ultimately only part of the puzzle.

What’s blocking growth? The 70% of the audience you can’t see (yes, 70%)

The conversation around cookie deprecation isn’t theoretical. Right now, at least 70% of the open web is already operating without third-party cookies and IDs. This isn’t just a measurement challenge. It’s a growthproblem.

One of many reasons it’s a growth problem is because the open web contains millions of prospective customers researching products, comparing brands, and making decisions. But, if you’re only finding less than 30% of them because you’re solely relying on a cookie or other ID, you’re missing the much larger audience that represents your next set of customers and who can unlock real growth.

So when we open up Campaign Manager and look to ROAS as a measure of effectiveness,  we’re missing that 70% of the audience in the open web that leads to growth.

So what’s the key to overcoming the shrinking pool of identity in the open web? First-party data. Kind of…

The limits of looking in the rear-view mirror

First-party data (1PD) is one of the most valuable assets we can access. Marketers have wisely invested in 1PD collection and activation strategies, and on the other side of the often-initial pain of implementing CDPs, defining taxonomies and data dictionaries, many are seeing success leveraging this in channels like social.

But the reason that 1PD is successful for delivering growth in those channels isn’t because it’s retargeting the users in that dataset, it’s because platforms like Meta have evolved in the wake of privacy changes like Apple’s ATT, to use both AI and the signals of its wider audience to find the next set of your customers that look like your current 1P customers – the ones you wouldn’t have found otherwise. This is the real opportunity for incremental growth.

On its own your 1PD is a rear-view mirror – it shows you where you’ve been. However, when it’s combined with other signals and AI, it can show you where you’re going.

So if this approach to leveraging 1PD delivers incremental outcomes in social, how does it help with finding the millions of users in the open web when so few of them can be ‘tracked’?

Finding incrementality and growth outside of the walled gardens

If solutions like Meta’s Advantage+ are driving growth by predicting net new customers, can we do the same with a DSP in open web programmatic?

The answer is yes – but not by only utilising the programmatic pipes that have underpinned media buying in the open web for decades.

Injecting 1PD into those pipes is inherently limited because the infrastructure that supports programmatic was built primarily for retargeting based on identity signals. To find the next set of customers that unlock growth, we have to use our 1PD like a map to uncover the signals of users that we haven’t yet engaged with out there in the 70% of hidden audiences.

Those signals exist in vast quantities on the supply side. The question becomes, with so many media owners in the open web: how do I leverage my 1PD to find high-quality signals and drive growth in the open internet?

To turn your first-party data from a rear-view mirror into a true map for growth, marketers can’t navigate the open web alone. The key is to find trusted co-pilots who can help read the terrain and uncover the paths to the next customer.

In the next part of this series, we’ll explore the foundation that makes this possible: data collaboration.

I help leading advertisers solve their biggest challenge: proving incremental growth on the open web. At Permutive, we make this possible by providing the platform for advertisers and publishers to collaborate on data securely.