From Growth to ROAS: Optimizing Campaigns for Profitability

It can be tempting to think of growth and profit as requiring two separate campaigns with two sets of goals, but just about any growth campaign will shift to return on ad spend (ROAS) at some point. With some pre-planning and honest assessments, the data delivered during the growth period will inform when and how to begin optimizing for profitability.

“I think the overarching theme in 2023…was a shift from growth at all costs to growth with ROAS as the primary metric,” said Matt Conlin, Chief Customer Officer at Fluent on a recent PocketGamer podcast. “CFOs see the economy tightening and they need to be more profitable faster. In 2024, we’re keeping a close eye on how those metrics evolve and how marketers start to shift focus toward a shorter payback window with healthier D7, D30, and D180 performance.”

For marketers navigating the shift from growth to ROAS, the more you know about your audience, market trends, and other external factors, the easier it will be to make informed decisions for optimizing campaign performance.

Examining Campaign Results

Marketers can keep track of their most engaged customers from the start of the growth period. Over time, the unique qualities that define the best customers will reveal themselves and provide the insights needed to gradually shift over to profit goals. But visibility into ROAS can be tricky.

Looking simply at the cause-and-effect relationship of how much revenue was gained from running a campaign can lead to false results due to fraud, cannibalization, and other external forces. Determining true incremental lift requires a holistic approach to advertising that accounts for as many of these factors as possible.

External Forces Impacting Profitability

The external forces include: 

1. Organic Uplift: Users acquired through referrals, browsing, or word of mouth will skew performance numbers if not tracked properly. To establish a holistic view of revenue generation, make sure attribution numbers are accurate and factor in the organic engagement and downloads. For more, see K-Factor.
2. Seasonality: Holidays, sporting events, weekends, weather, and special occasions will impact user behavior and ultimately performance metrics, including lifetime value (LTV) and ROAS goals. While these can’t be controlled, they can be accounted for.
3. Competitors and In-Game Updates: Market dynamics influenced by new competitors or in-game updates will disrupt user behavior and monetization metrics. Recalibrate your ROAS goals to accommodate these fluctuations.
4. Fraudulent and False Data: Fraud tells you what you want to hear so be skeptical and honest about whether the campaign is leading to real revenue. 

Internal Forces Impacting Profitability

Internal forces are easier to account for but can also be easy to overlook. They include:

1. Campaign Changes: Budget, creative, media partners, and new tech partners can all go through changes during the campaign run. Monitor each shift closely to ensure accuracy. 
2. Segmentation: It’s important to keep track of audiences by ad platforms, ad channels, campaigns, operating systems, geos, game genres, and keywords to identify areas for optimization. As it becomes more apparent which segments are yielding the best customers,  you will be one step closer to steering your campaign toward established ROAS metrics. For more see Segmentation.
3. Lifetime Value: Understanding LTV based on all the user data points and across different segments like operating systems, geos, and game genres is essential for setting tailored ROAS goals.

Shifting Campaign Objectives

Gone are the days of “set it and forget it” or blasting the marketplace with ads and expecting results. Privacy regulations require a far more thoughtful and measured approach. While you may not be able to account for everything that impacts your campaigns, factoring in the above will provide some clear visibility into the most highly engaged customers. A savvy performance marketer will start by testing audiences and creatives. 

Of course, every business is different – some want to establish market share and others want to turn a profit quickly – but the data will indicate when the internal benchmarks have been reached and that’s a good time to set ROAS goals. It can be hard to walk away from growth campaigns because the results are so tangible, but it’s important to stick to the plan. 

Make the switch from growth to profitability gradually. Once you gain some visibility into who your best customers are, and the growth metrics (CPA, CPI, CPE, CAC, etc.) start yielding less, start testing campaigns with ROAS in mind. This balanced approach should lead to success as you refine your campaign to find your best customers.  

Optimizing for Profitability

Once you assess LTV and segment your audiences, consider retargeting and down-funnel optimization. The user data should help you identify opportunities for driving down-funnel event conversions. And as the growth campaigns stabilize, consider increasing the target ROAS gradually to achieve better profitability, even if it impacts campaign volume. 

Remember to set realistic ROAS goals. Factors like break-even point, profit margin, and growth stage should be considered. This should help adjust ad spend and strategy accordingly. Remember that ROAS targets are best suited for businesses with varying profit margins, limited budgets with profitability goals, or shorter runs like seasonal campaigns. Avoid establishing ROAS targets for brand awareness campaigns or for a new business or product without much or any historical data.

Finally, If you notice a drop in your ROAS after launch, it’s essential to analyze the root cause. Examine intermediary steps in the funnel before and after implementing changes. Avoid making impulsive decisions and ensure the problem is real before taking action. Monitoring campaigns regularly, checking conversion tracking, and understanding the impact of changes are crucial steps to addressing declining ROAS numbers.

Switching from growth to ROAS is ultimately a decision born from data. The more you know, the more successful you will be. And even when it isn’t successful, you will know how to fix it.

Get in touch with us here to learn how Fluent can help you shift your customer acquisition objectives from growth to profitability.

Check out more resources to get fluent in:

Lifetime Value | User Acquisition | Performance Marketing | Incrementality Testing