Why is ROAS alone not enough?
ROAS is the ratio of sales revenue attributed to advertising to advertising spend. CAC is the customer acquisition expense within the scope of the calculation you choose divided by the number of new customers. You can't say the business is making five times profit when the ad panel shows five times revenue. Product, shipping, commission, returns and production costs are also included in the sale. First, make sure you're using the same currency, the same date range, and the same definition of income.
Hypothetical product economics
An order leaves 1,000 TRY in revenue after rebates and indirect taxes; Assume product, payment, packaging and delivery costs are 600 TRY. The pre-ad contribution is 400 TRY. If 350 TRY is spent to purchase this order, you will be left with 50 TRY before fixed expenses and income tax. If the advertising cost increases to 450 TRY, the larger the order, the larger the loss. In the same example, with the assumptions unchanged, the breakeven ROAS is 1 / 0.40 = 2.5 since the pre-ad contribution rate is 40%. This limit does not cover fixed expenses.
