Paid search advertising is incredibly simple to purchase. But it’s nearly impossible – and in many ways literally impossible – to understand and analyze what you’ve purchased or how effectively that money has been spent.

Why? Because the fine folks who make it so easy to buy and pay simply do not share the information you need (and I’d argue deserve) in order to understand what you bought. And to a lesser extent because the after-market analytics packages take what they’re given and pass it on to you without adding any value beyond rich formatting.

What about ROAS you ask? Ah yes. Return On Ad Spend. The one aspect of your results that is easy to calculate and even supported by the search networks. ROAS measures whether you are ‘making’ more money than you are spending. It’s fine as far as it goes, providing an initial indication of the health of your overall program and perhaps individual campaigns.

But ROAS has a number of shortcomings and even flaws, and as a metric should really be killed once we finally get Page Views into the ground.

What’s wrong with ROAS? Here’s a partial list:

• As a measure of gross revenue it ignores the tiny little reality of COGS. In other words, you can have a large positive ROAS and still be losing money on every sale. A metric only an ad network could love.
• As provided it only tells you how a blended set of search terms, positions, text ads and landing pages are performing and gives no visibility or account for the prior or subsequent actions of site visitors. As a result, it’s impossible to have an intelligent surgical reaction, and very likely to drive actions that produce quite unintended consequences.
• With its basis in the advertising spend, the easiest way to drive up ROAS is to cut certain spending. Mathematically that often doesn’t yield the highest revenue or profit. It’s like driving a car and optimizing for miles-per-gallon without regard for your destination.

In the next three posts I’ll take a deeper look at each of these flaws and talk about things you can do to overcome them.