This third post in the series isn’t about what’s wrong with ROAS as much as how ROAS is misperceived. As the only real measure of performance provided by the search networks and web analytics packages it’s easy to get the impression that ROAS is actionable information. But like a lot of other analytic metrics, it’s really only useful as the starting point for questions and investigations.

Is a 500% return-on-ad-spend good? Is a 159% ROAS bad? As discussed previously, that depends upon the net profit margin of the goods/services sold.

If ROAS is below a certain threshold for a particular keyword, should you delete or pause it? If ROAS is above a threshold is everything peachy-keen? The answer to both is probably ‘no’ at least until the current bid, text-ad, landing page, and offer pricing are considered, modified or tested.

It’s easy to fall into the trap of thinking that individual keywords are either ‘good or bad’. But the truth is that in paid search you’re measuring a system – the keyword, search query, text-ad, position, bid, landing page, conversion funnel, checkout process, product selection, and pricing offers and terms. While it’s obviously not possible to infinitely test every possibility for each of these variables, keeping them all constant and rendering judgment on the keyword clearly isn’t fair or reasonable either.

From a workflow perspective neither the search networks nor web analytics packages are of any help in measuring return (on ad spend or investment) as you perform a more complex series of tests of the other variables that impact the success of a keyword. The fact that all currently available tools fail to support are more complete and realistic view of the search environment clearly has a lot to do with the overly simplistic way most campaigns are still managed and reported on and evaluated.

Take one simple variable, text-ad creatives. Wouldn’t it be great if the revenue or ROAS graph for a keyword marked the points in time where different creative tests where run and showed the impact of those tests (v1 vs v2 vs V3)? Wouldn’t that be better than reviewing results and toggling to the text-ad report and then continually switching date ranges to check when ads were changed and how results varied? Or setting different tracking codes and comparing the tests to each other without being able to directly graph their progress?

ROAS is just one example of the conspiracy of false simplicity in the paid search world today. It’s helping the engines make a lot of money, and costing advertisers a bundle.