ROAS is one of the most widely used Google Ads metrics, and it's very easy to understand: if you spend £1 and generate £8 in revenue, the account has an 800% ROAS. But revenue is not profit. For ecommerce retailers, that distinction is important, but it's sometimes lost in the sauce. Two products can have the same ROAS but very different commercial outcomes if their margins differ, and that's why margin-based bidding is becoming more important.
The problem with ROAS targets
A ROAS target treats revenue as the main measure of success, which can work at a broad level but quickly becomes limiting when product margins vary.
For example:
- Product A has a 70% margin and a 500% ROAS
- Product B has a 20% margin and a 700% ROAS
On ROAS alone, Product B looks better. But once margin is considered, Product A may be more profitable and may deserve more investment. If your bidding strategy only chases ROAS, it may hold back products that could drive more profit.
Why this matters for ecommerce and Google Ads
Most ecommerce catalogues contain a mix of products with a mix of high and low margins. Some are used for acquisition while others are used to clear stock, and some have strong repeat purchase potential while others are one-off purchases.
A single ROAS target across your Google Ads account cannot reflect all of that.
This can create poor budget decisions, such as:
- Underinvesting in high-margin products
- Overinvesting in low-margin products
- Treating strategic products like ordinary SKUs
- Restricting growth because the account is chasing efficiency
- Allowing revenue-heavy but low-profit products to dominate spend
Why setting a ROAS target can damage your best sellers
A high-margin product at 400% ROAS may be more valuable than a low-margin product at 800% ROAS. But if your target is set too high, the system may restrict the high-margin product before it has a chance to scale.
A high-margin product can often afford a lower ROAS because there's more profit in each sale, while a low-margin product may need a much higher ROAS to remain commercially viable. That's why the same target should not be applied to every product.
If your platform target is too blunt, your best products may not get enough room to grow.
Why Google Ads misses this by default
Google Ads can optimise towards revenue and conversion value, but it does not automatically understand your full margin structure unless that data is passed in and used correctly. Even then, we see many advertisers still manage campaigns around blended ROAS targets because they're easier to report. The issue is that easy reporting doesn't always lead to better decisions.
CMOs and heads of ecommerce need to ask whether their bidding strategy reflects actual profitability, not just platform efficiency.
