Latest / Retail Media Breakfast Club / ROAS Refuses to Die: The Retail Media Measurement Problem No One Wants to Fix
Transcript
- ROAS Refuses To Die === [00:00:00] Kiri Masters: Every parent has said at some point, we need to cut back on screen time and we mean it. But then 5:00 PM rolls around. You need to cook dinner. There's a meltdown, and in flies the iPad [00:00:15] as the soothing bal because the incentives of the moment a cooked meal, your sanity overwhelm the noble principle from a few hours ago. [00:00:25] That's like ROAS in retail media. Everyone agrees it's [00:00:30] flawed, but we're still using it. [00:00:31] [00:00:33] Kiri Masters: A new report from the Ad Tech publication ad Tap puts real numbers and experiences behind a persistent paradox. [00:00:40] In our industry, brands are frustrated with retail media [00:00:45] measurement, but they keep on spending anyway. Advertisers say they're not confident in what retail media networks offer in terms of measurement in the path to purchase institute's latest study. [00:00:59] [00:01:00] 19% of media buyers now call RMNs a simple money grab for the retailer that is more than double the 8% who said the same thing last year? And yet retail media budgets just keep growing. [00:01:15] Sky's state of retail media report this year shows that media buyers are continuing to pump investment into retail media across all of its different formats, including on site search ads, DSP [00:01:30] ads. [00:01:30] Onsite video ads and in store. This mirrors a pattern that I wrote about last year when talking about consumer attitudes towards retail media ads. What people say in surveys and what they actually [00:01:45] do are often at odds. Harvard Business Review Research found 65% of consumers say that they prefer eco-friendly brands, yet only 26% actually buy them. [00:01:58] That gap between [00:02:00] stated preferences and revealed behavior is well documented in consumer research, and it turns out it applies to media buyers too. [00:02:10] The Habitat report nails why ROAS still persists. It [00:02:15] lays out a collective action problem where every actor in the system is behaving rationally, but the system stays broken as a result ~from the report.~ [00:02:24] ~This is ~this is from the Report. For retailers, higher reported ROAS means more [00:02:30] ad spend. There's no incentive to implement measurement that might show lower effectiveness for brand side, retail media teams, they're using strong roll as to justify their budgets and headcount. [00:02:43] Rigorous [00:02:45] incrementality testing might reveal wasted spend and threaten the very program they've built. Agencies are often compensated on ROAS targets. Questioning the metric means questioning their own performance. As I wrote [00:03:00] last year, even strategically minded agency teams default to promotional tactics when they know they'll be judged on next quarter's roas. [00:03:08] It's rational behavior. And finally, CFOs and finance teams love ROAS because [00:03:15] it's simple, comparable, and fits on a slide. Incrementality is complex, expensive, it takes months to produce results when the CFO asks. Is our retail media working A ROAS number [00:03:30] answers in seconds. An incrementality study answers in quarters. [00:03:34] This is the bit that gets overlooked in the roas, is broken discourse. It's not that people don't know better, it's that the incentive to keep using ROAS is stronger than the incentive to [00:03:45] replace it for every single person in the value chain. [00:03:48] Industry analyst Andrew Lipman wrote last year in his newsletter. ROAS is the single greatest force that determines ad spending today. It creates a vicious cycle [00:04:00] where even strategic retail media investments get evaluated on short term metrics. Demonstrating positive return on ad spend has become how media sellers, agencies, and brands capture more dollars. [00:04:13] But as Andrew points [00:04:15] out. True marketing effectiveness typically plays out over months and years, not days and weeks. Retail media networks desperate to prove their worth to budget. Holders have leaned heavily into a media attribution and [00:04:30] conversion. [00:04:30] Tracking media buyers have inadvertently created their own worst nightmare. Miracle Ads is the Ad Tech solution trusted by [00:04:45] Rakuten and over 50 global enterprise retailers. That's because Miracle Ads was built with both three P Marketplace sellers and one P suppliers in mind. Both advertiser audiences demand a seamless [00:05:00] advertising journey from onboarding to reporting. [00:05:03] You can offer everything from sponsored products to video ads all in one solution. Learn more@miracle.com. That's M-I-R-A-K [00:05:15] l.com. [00:05:15] [00:05:16] Kiri Masters: In defense of roas, kind of here's where the ROAS is dead. Take has become its own kind of lazy consensus. The Habitat report includes some interesting counterarguments that [00:05:30] deserve a hearing. Number one, ROAS is good enough for most brands. Most of the time when you are managing four or more RMNs with fragmented data. [00:05:40] ROAS is the only common currency across those different retailer [00:05:45] dashboards. [00:05:45] It's imperfect, but it is functional. And As one industry commentator noted. The problem isn't a metric itself. It's how retail platforms can game it. Number two, incrementality testing [00:06:00] doesn't pencil out for smaller spenders. Below a certain threshold in total retail media spend, the cost and complexity of geo experiments can outweigh the benefit for brands at that smaller scale. [00:06:12] The priority should be avoiding big [00:06:15] mistakes, not running perfect experiments. And number three, the gap between measuring incrementality and acting on it is huge. This is the one that kind of stings brands run expensive tests. Get results, and [00:06:30] then nothing changes. The organizational inertia is too strong. [00:06:34] The test sat in a deck that nobody opened. ~Incrementality has been called the most misunderstood concept in retail media, and I think the bigger issue is that it's the most.~ [00:06:37] ~Incrementality has been called the most mu. ~Incrementality has been called the most misunderstood concept in retail media, but perhaps the bigger issue is that it's the [00:06:45] most unused concept. So this is the lived reality for a lot of mid-market brands, and it helps to explain why ROAS manages to clinging on year after year. [00:06:58] It's not just about misaligned [00:07:00] incentives, it's that the alternatives aren't within reach for everyone. So if ROAS won't die by industry consensus or panel discussion, what really kills it? [00:07:10] The sky 2026 state of retail media study offers a [00:07:15] clue when asked what would speed up their retail media investment. Standardization across retailers came in at just 15%, but better measurement scored 52%. Brands ultimately want proof that something [00:07:30] works more than they want everyone measuring the same way, [00:07:33] but the brands that are pulling ahead aren't waiting for the industry to sort itself out. As I wrote last week, top performers are building their own operating systems on top of retail media. Cross [00:07:45] retailer normalization, independent measurement, incrementality testing on their own terms. They're building the connective tissue that doesn't exist natively [00:07:55] ~as the Habitat report notes, everyone knows measurement is flawed, but no individual actor has sufficient incentive to fix it. Organizations are KPId and bonused on last touch ROAS until incentive structures change. Measurement practices won't, regardless of how many industry panels discuss the problem.~ [00:07:55] ~I, until then, we should expect just as.~ [00:07:55] As the Habitat report notes, everyone knows measurement is flawed, but [00:08:00] no individual actor has sufficient incentive to fix it. Organizations are KPId and bonused on last touch roas until incentive structures change, measurement practices won't. Until then, we should [00:08:15] expect just as many panels About how ROAS is broken and people agreeing that things need to change, and then Monday morning arrives and everyone opens their dashboards and optimizes against the number that keeps their budget safe, keeps their [00:08:30] bonus intact, and keeps their CFO happy. Just like you meant it about the screen time, right up until 5:00 PM. [00:08:39]