Why Your ROAS Dashboard Is Lying to You

Your Meta dashboard says 4x ROAS. Your Google Analytics confirms it. Yet somehow, your bank account doesn't reflect the profitability those numbers promise. You're not imagining things—and you're not alone.

After analyzing financial data from dozens of D2C brands, we've found that the gap between reported ROAS and actual profitability is consistently 40% or higher. Here's why.

The Attribution Problem

ROAS calculations assume that ad spend directly caused the conversion. But customer journeys are rarely that simple:

• A customer sees your Meta ad, doesn't click, but searches your brand on Google later
• Someone receives a WhatsApp message, visits your site from the ad, but converts from an email reminder
• Attribution windows capture conversions that would have happened anyway

“We had campaigns showing 8x ROAS. When we turned them off for a month, our organic conversions went up by nearly the same amount. We were paying to convert people who were already going to buy.”

What ROAS Doesn't Count

Even if attribution were perfect, ROAS measures revenue, not profit. It ignores:

• Returns: A 25% return rate means 1 in 4 “conversions” generates zero revenue
• Discounts: The “revenue” counted often includes orders with 30-50% discounts
• Fulfillment costs: Shipping, packaging, payment fees
• Customer service: Handling issues from acquired customers
• Repeat purchase cannibalization: Paying to acquire customers who were already yours

A Better Metric: Profit ROAS (pROAS)

We recommend tracking Profit ROAS instead:

pROAS = (Revenue − COGS − Variable Costs) × (1 − Return Rate) ÷ Ad Spend

This gives you the true profit generated per rupee of ad spend. For most brands we work with, their “4x ROAS” campaigns are actually running at 1.2-1.8x pROAS—barely breaking even.

What to Do About It

1. Calculate pROAS for your top campaigns using the formula above
2. Run incrementality tests by pausing campaigns in select regions
3. Track blended CAC across all channels, not channel-specific ROAS
4. Focus on contribution margin per customer rather than revenue per customer