Chapter 01
Revenue is a vanity metric at the SKU level
ROAS optimises revenue. Revenue is not profit. When your catalogue has a mix of margins, a flat ROAS target quietly pushes budget toward whatever converts most easily, and the things that convert most easily are often your discounted, low-margin bestsellers. The dashboard goes up and to the right. The contribution margin sits at break-even. Everyone's confused about why a winning account feels broke.
Here's the math that exposed it. A flat 3.2x ROAS means your ad cost is the sale price divided by 3.2. Run that against two real SKUs from this account and the truth is brutal.
Same ROAS, opposite outcomes
| SKU | Price | Margin | ROAS | Profit per sale after ad cost |
|---|---|---|---|---|
| Discounted bundle | $80 | 12% | 3.2x | −$15 |
| Hero product | $140 | 58% | 3.2x | +$37 |
The $80 sale costs $25 in ads and carries $9.60 of margin, so it loses $15. The $140 sale costs $44 and carries $81 of margin, so it makes $37. Same ROAS. One funds the business, one drains it.
