What is return on ad spend?

Why it matters for a contractor.

For a contractor it flatters more than it informs, because it counts signed revenue rather than margin and ignores the cost of the crew that has to deliver it.

A 6x return on a job at thin margin can be worth less than a 3x return on a job at healthy margin, and the ratio cannot tell you which one you had. Contractors sell labor and materials, not software, so gross revenue and money kept are very different numbers.

It also silently excludes everything that is not media. The fee, the sales time, the estimator's truck, and the jobs that were sold and then went sideways are all outside the ratio, which is why a strong number on a dashboard can sit next to a bad year.

It is most useful as a comparison between campaigns in the same trade and the same period, where the omitted costs are roughly equal. Across trades or across years it compares very little.

Where media is included in the fee, as it is here, the ratio stops being a meaningful input at all: there is no separate ad spend to divide by, which is a good reason to look at cost per booked job instead.

What to ask a vendor about it.

• Is this revenue or margin? Ask which, because the ratio does not say.
• Does it include the fee and the sales cost, or only media?
• What is the equivalent figure in cost per booked job?
• Would this number look different if we counted jobs that went sideways?