The actual KPIs your
Google Ads agency should
focus on (hint: not ROAS)
The KPIs a Google Ads agency should focus on are new customer acquisition cost, contribution margin, customer lifetime value and payback windows, because each one connects ad spend directly to the P&L. Return on ad spend (ROAS) is only an efficiency ratio, and a high target pushes Google towards warm users and existing customers rather than new ones. If new customer acquisition cost is higher than breakeven, the brand loses money on every new customer.
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Why do Google Ads agencies report on ROAS instead of profit?
Google Ads agencies report on ROAS because spend-based fees such as mark-ups or revenue share reward higher ad spend, and because ROAS is easier to build a weekly narrative around than unit economics, seasonality or offer strength.
The harsh reality goes two ways.
They're incentivised by your ad spend
That clause in your contract about mark-up or, worse, rev share means the agency - no matter how well-intentioned - still has an incentive to get you to spend more, even at the expense of your own profit. Whether they're aware of it or not.
You'd find a lot more questions about margins, repeat rate, buying cycle and overheads if it were a profit share. That's for sure. As your flat-fee growth consultant for Google Ads, I avoid this problem completely.
It's easier to form narratives with ROAS
In reality, seasonality, macro-events, unit economics, price vs market, offer strength and channel role in a brand's marketing ecosystem are a lot harder to explain, challenge and improve - yet they unlock far greater results when explored properly.
It's a lot easier to stay at surface level and report your efficiency of spend in relation to top-line revenue on a weekly basis.
Why is ROAS the wrong KPI for scaling a Google Ads account?
ROAS is the wrong KPI for scaling a Google Ads account because it is an efficiency ratio, not a growth engine: the higher the target ROAS, the more Google throttles spend and shows ads to the warmest users and existing customers rather than the colder audiences where new customers are found.
"Adjust your spend 200% and get the same/similar ROAS." Sounds great. Juniors or CMOs hearing this will think it's a no-brainer. Why are we not scaling if we can?
If the ROAS target is exceeded, the campaign enters significantly more expensive auctions - trying to convert those left in the audience pool at that efficiency level. If it can't hit the target, the campaign throttles its own spend to preserve the ratio.
ROAS acts as a "warmth dial". The lower your target ROAS (tROAS), the colder the audience - and the less likely they are to convert. That's where your new customers live, and new customers are what actually grow your business.
A higher tROAS means you're telling Google to hit a very difficult efficiency ratio, especially at scale. To meet it, Google shows your ads to extremely warm users - website visitors, add-to-carts, begin-checkouts, and crucially - existing customers. The same customers you've already won.
Google's own attribution modelling has significant limitations due to growing privacy measures. More and more early touchpoints in user journeys are blocked or stripped from conversion tracking - or the whole journey is unconsented and you're over-reliant on Consent Mode to model it. The result: lower-funnel end touchpoints are attributed the sale, prospecting campaigns are under-evaluated, your agency increases the ROAS target, and the cycle continues - making the dashboard green whilst your business stagnates.
Interactive
The solution
Shift your KPIs to these four metrics. Each one connects your ad account directly to your P&L and are the ones I focus on when working together.
Closing thoughts
You won't be surprised to learn that none of these metrics feature in Google's Skillshop courses. They're not easy KPIs to measure yourself against — and they certainly present more challenging conversations with stakeholders than "ROAS is good, spend more."
But by focusing on NCAC, contribution margin, CLTV and payback windows — alongside new customer volume — you start to align your marketing KPIs to the actual business P&L.
That shift moves you away from agency waffle and obscurity, and into P&L clarity.
If your agency still reports on ROAS, independent strategy and advisory can keep the account measured against these numbers instead.
You can watch the full YouTube video breaking this down.