Why ROAS Is a Misleading Metric for Enterprise Amazon Brands

ROAS alone can be misleading for enterprise Amazon brands because it reflects ad-attributed efficiency rather than total business impact. A strong ROAS does not indicate whether sales are incremental, margin-positive, or partially driven by existing organic demand. Enterprise teams need to evaluate incrementality, blended performance and contribution margin alongside ROAS to understand sustainable growth.

Attribution vs. Contribution

ROAS measures the revenue attributed to advertising spend, but it does not indicate whether that revenue was incremental or margin-positive. In established brands with strong organic visibility, some ad-attributed sales — particularly on branded or high-intent keywords — may have converted regardless of paid activity. In those cases, advertising influences the path to purchase without necessarily creating new demand.

When performance is judged primarily on ROAS, teams often concentrate budget on bottom-of-funnel terms where conversion rates are already high. While this can improve reported efficiency, it does little to expand market share or acquire new customers. Over time, growth becomes concentrated around existing demand rather than driven by incremental expansion.

Understanding the Incrementality Gap

For enterprise brands, one of the more complex challenges is determining how much ad-attributed revenue is genuinely incremental. In 2026, data suggests that for top-tier brands, as much as 30% to 50% of ad-attributed revenue can be non-incremental. Therefore, in mature accounts with strong organic visibility, some paid sales may reflect demand that would have converted regardless of advertising support.

Key areas to evaluate include:

• Branded search overlap: When a brand already dominates organic results, aggressive bidding on branded terms can produce strong ROAS figures while capturing clicks that may have converted organically.
  
• Organic–paid interaction: Advertising can support ranking, but a strong organic presence can also improve reported ad efficiency. Without deeper analysis, this interaction can blur the true impact of media spend.
  
• Incrementality measurement (iROAS): More mature teams use incrementality testing – through geo-experiments or Amazon Marketing Cloud insights – to estimate which sales occurred because of advertising rather than alongside it.
  

Understanding this gap allows brands to shift from attributed performance toward measurable incremental growth.

Beyond the Dashboard: New-to-Brand (NTB) Metrics

New-to-Brand metrics provide insight into who advertising is actually reaching. For established enterprise brands, the distinction between existing customers and genuinely new buyers matters, particularly when assessing long-term growth. A sale driven by advertising may appear efficient, but its strategic value differs depending on whether it expands the customer base or reinforces existing demand. A campaign with a lower ROAS but a 70% NTB rate is often more valuable to long-term enterprise health than a “safe” campaign with a high ROAS and only 20% NTB.

In practice, campaigns that acquire a higher proportion of new customers can justify lower short-term efficiency if the lifetime value of those customers supports the initial acquisition cost. This requires looking beyond platform-level ROAS and considering customer acquisition cost (CAC) alongside projected lifetime value (LTV). When evaluated this way, media investment becomes less about immediate return and more about controlled, sustainable expansion into new segments of the market.

The Structural Shift: TACOS and Contribution Margin

Moving beyond a ROAS-led view of performance requires broader financial context. Enterprise teams tend to evaluate advertising within the economics of the whole business rather than at campaign level alone.

• TACOS (Total Advertising Cost of Sale): TACOS measures advertising spend against total revenue, including organic sales. This helps determine whether media investment is expanding overall performance or simply capturing demand that already exists.
  
• Contribution Margin (CM3): A more complete performance view requires deducting all variable costs – product cost, fulfilment, placement fees, returns and ad spend – to understand the true cash return per unit. Revenue growth without margin visibility can mask weakening profitability. If you’d like to learn more about how to use CM3, please read here.
• Incrementality Testing: Using tools such as Amazon Marketing Cloud to compare exposed and unexposed audiences allows teams to estimate the actual impact of media investment across the wider customer journey, rather than relying solely on attributed conversions.

Conclusion:

The shift toward structural maturity requires enterprise leaders to look past surface-level dashboards and embrace a profit-first perspective. By prioritising incremental growth over vanity ROAS targets and auditing the SKU-level “hidden” economics of every product, brands can transform their Amazon presence from a simple sales channel into a resilient financial asset. Ultimately, long-term success in 2026 is reserved for those who integrate finance, operations, and media into a unified boardroom strategy that protects margins while aggressively capturing new market share.

Want to see your Amazon performance skyrocket? Book a call with our team or email us at amazon@marketrocket.co.uk to take your brand to the next level.