Why (and when) you shouldn’t use target ROAS bidding

ROAS-based bidding like target ROAS is a terrible move…

…for some brands.

Two campaigns can both show a 3x ROAS, yet one could be scaling profitably while the other is just scraping by.

The only difference is what they’re optimizing for.

One is chasing the “show” ROAS, the number you see in your dashboard.

The other is chasing the real ROAS, the money that lands in your bank account.

Here’s what I mean by that…

Let’s say both campaigns spend $10k and report a 3x ROAS, generating $30k in sales.

On paper, both seem to deliver $20k in profit.

But when you take a closer look:

Campaign A’s sales come from a product with a 10% profit margin. $2k in actual profit.

Campaign B’s sales come from a product with a 50% profit margin. $15k in actual profit.

Same “show” ROAS, completely different bottom lines.

When you use revenue-bidding like tROAS, you’re telling the algorithm to optimize for “show” ROAS.

It’ll double down on the items that sell the most, regardless of whether they barely break even or deliver a 70% margin.

This is why some brands can get a 5x “show” ROAS while losing money in the background.

The solution is optimizing for the real ROAS.

That’s where profit-based bidding (POAS) comes in.

Instead of rewarding high-revenue products, you prioritize high-margin ones.

That way, you signal the algorithm to focus on profitability rather than revenue volume.

This is especially crucial if you have a wide range of products with mixed margins.

Because in that case, your best-sellers aren’t always the products that make you the most money.

And optimizing for revenue alone can be misleading.

It’s a much smarter choice to go for the products that put the most profit in your pocket and help you grow sustainably.

Jackson

Founder and CEO of Echelonn

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