Measuring the success of an advertising campaign isn’t just about “how much it brings in”. While ROAS (Return On Ad Spend) often takes center stage, its lesser-known cousin, COS, deserves its place in the spotlight. One talks revenue, the other talks profitability, and your margins love to be talked about!
Why ROAS is a Dream Come True
ROAS calculates the revenue generated for every euro spent:
ROAS = Revenue / Ad Spend
- Quick example: €1,000 invested → €5,000 revenue → ROAS = 5.
- Quick read: “Every euro wagered brings in €5”.
- Limitation: ROAS ignores your actual costs (inventory, logistics, fixed costs…).
A ROAS flashing green doesn’t always guarantee a smiling banker. Learn more about other KPIs.
COS: the Guardian of your Margin
Conversely, COS (Cost On Sale) measures the portion of revenue dedicated to advertising:
COS = Ad Spend / Revenue
- Same example: €1,000 spent / €5,000 revenue → COS = 20%.
- Simple read: “20% of my sales go into ads”.
COS is integrated into margin calculation and reveals the true profitability of your paid search or paid social. A good way to get CMO and CFO on the same page.
ROAS or COS? Choosing without Error
| Situation | ROAS | COS |
|---|---|---|
| Evaluate the commercial power of a campaign | ⭐⭐⭐⭐ | ⭐⭐ |
| Check net profitability (margin) | ⭐ | ⭐⭐⭐⭐ |
| Set a rigorous budget strategy | ⭐⭐ | ⭐⭐⭐⭐ |
Is a product’s margin 30%? If your COS exceeds 30%, profitability is gone, even with a very high ROAS. This is where COS saves the day, and you need to keep an eye on it.
Define your Target COS
- Calculate the net margin per order (product cost, logistics, transactions, etc.).
- Apply:
Target COS ≤ Net Margin / Revenue
Example: Your product is sold for €100, with a net margin of €30.
Max target COS: 30% → you need to invest ≤ €30 in ads for every €100 sold.
Adjusting COS
- Low margin? Tight COS is mandatory.
- Product launch? Allow a higher COS to gain market share (LTV in sight).
- Evolving product mix? Recalculate regularly to match reality.
Marrying ROAS & COS
- ROAS indicates commercial efficiency.
- COS validates profitability.
Tracking both means:
- Shining a spotlight on revenue.
- Keeping a watchful eye on the margin.
Result: informed investment decisions for your next advertising campaigns.
Conclusion: Let your Numbers Speak!
By using ROAS to measure commercial power and COS to verify real profitability, you transform an avalanche of data into clear and profitable decisions. Your dashboard is no longer just a “reporting” tool, but a GPS: it shows the route (ROAS) and fuel consumption (COS).
Need a Boost?
The Donutz Digital teams are already supporting dozens of e-commerce businesses, VSEs, and CMOs to turn every euro of advertising into sustainable growth. Paid search strategy, paid social, tracking, reporting: entrust us with your goals, we’ll take care of the rest!
FAQ
What is a Good ROAS for E-Commerce?
A ROAS ≥ 4 is often considered solid, but it depends on your margins, fixed costs, and industry.
How to Lower My COS Quickly?
Optimize your bids, improve your conversion rates, and test other cheaper channels.
Can You Have a High ROAS and a Too-High COS?
Yes! If your margins are low, a high ROAS can mask a COS that eats into your profit.
Is COS Suitable for Brand Awareness Campaigns?
It’s less suitable. For pure awareness, track CPM or reach instead, then analyze COS in the conversion phase.
Should ROAS/COS Targets Differ between Paid Search and Paid Social?
Absolutely: costs and purchase intent vary. Set thresholds adapted to each channel.
