Profit Margins & Real Revenue in Adobe Analytics: Part I

Erasing the Blind Spot of Marketing Measurement

Your Analytics Revenue is misleading— in some cases it is over 50% off. But not because of tracking errors! Start to understand your real Marketing performance: Analyze your Campaigns (and anything else people do on your site) by the actually invoiced Revenue and Profit Margin — all while staying within Adobe Analytics.

“Just half of what people ordered in the online shop actually turned into true bottom-line revenue (= the customer really paid for it)? So the data in Analytics is wrong? And aren’t we also sending false success signals to the Google Shopping and Facebook algorithms? Is it due to fraud? Or is it that customers buy products that are out of stock and orders have to be cancelled? And what? The 50% left were mostly products with a horrible profit margin?”

“Tracked Revenue” vs. “Actual Revenue”

The Blind Spot of Digital Marketing

A random example: Campaign Category 1 and 4 look like their ROAS was a lot better than Category 2. But it is actually worse if you look at the bottom line.
Actual Revenue divided by Tracked Revenue for several Product Categories for a random period in early 2020 (before Corona): Tracked Revenue is often a misleading compass.

Bidding Algorithms do what Bidding Algorithms do

Overcome the Limitations of Analytics and Leverage its Strengths

The Catalyst: Google Shopping’s Profit-based Bidding

“Margin / Ad Cost” vs. “Revenue / Ad Cost (ROAS)”: What is efficient ROAS-wise does not mean it is also efficient profit-wise

What makes “Tracked Revenue” less useful

1. People try to pay by invoice, but never pay or are rejected

Right column shows % of actual Revenue compared to tracked Revenue (left column) by payment method chosen. red = low rate.
Right column shows % of “Actual” divided by “Tracked” Product Revenue (left column), grouped by payment method chosen. Red = low rate. green = high rate.
11 Product Categories, number 3 compared by payment method
  • Column 1 (“Actual Revenue” divided by “(Tracked) Product Revenue”) shows how vastly the difference between Actual / Tracked Revenue can fluctuate: Between 55.8% for Category 3 (=only a bit more than half the tracked revenue is actually paid!!) to 95.5%).
  • Column 2 (% Margin on Actual Revenue) shows the bottom-line Profit Margin per Category
  • Column 3 (% Margin on Tracked Revenue) shows the bottom-line Margin compared to the Tracked Revenue.
  • bill” (invoice) which usually has a decent rate, gets only 54.4% here. So in Category 3, people who are pretending to pay by invoice very often do not pay after all.
  • Even worse are “instalment” and “prepayment”. However, when looking at the actual margins, we see that prepayment, for those 36% of Revenue that effectively gets paid, still has a very good Margin on Actual Revenue of 22% — which we would not have realized if we had compared the margin only to the Tracked Revenue (8.2%).

2. Stock Issues aka COVID-19 aka “this item cannot be delivered”

Tracking Out of Stock Status for can sometimes predict a low percentage of Revenue actually getting paid (=> products cannot be delivered)
Must-have: Alerts for Stock Issues and other indicators of wasted traffic

3. The Rest

  • people call or mail in to customer service to cancel their order or change the number of units (because they e.g. accidentally ordered two, but only need one)
  • a customer agent calling the client that product A may be a better option than B, and that he can change the order to product A if he wishes
  • business clients getting an additional discount after-the-fact after a chat with their account manager
  • bundles which are one product in the shop being split up into several products on the backend side etc.

Examples by Marketing Channel: Mind the Margin!

Tracked and Actual (Bottom-Line) Revenue even differs vastly by Marketing Channel!

The Marketing KPIs that really count

Marketing Channel Performance Metrics, Channel 1 and 3 broken down by Product Categories
  • Actual / Tracked Revenue: How much of what we track ends up getting paid
  • % Margin on Actual Revenue: Profit Margin / Actual Revenue (e.g. if you earn 10 EUR for 100 EUR sold, the % Margin is 10%)
  • Actual Margin / Ad Cost (“Margin ROAS”): The Margin divided by the Cost. Effectively shows how much remains from your Margin after you subtract Marketing Costs! => closest thing you can get to actual bottom-line profit of a Marketing Campaign!
  • Tracked ROAS: What you usually get in your Advertising or Web Analytics solution: Tracked Revenue / Ad Cost
  • Actual ROAS: Actual Revenue / Ad Cost -> counter metric for Tracked ROAS (see orange bar graph above the table)
  • % Delta Tracked / Actual ROAS: (Actual ROAS — Tracked ROAS)/Tracked ROAS -> How much does the ROAS go up or (usually) down if we look at the Actual instead of the Tracked Revenue? See e.g. Channel 3 which loses 24.4% on average, but only 8.5% for Category 2.
  • Ad Cost / Actual Margin: How much do I have to spend for 1 EUR of Profit (inverted “Margin ROAS”)?

Notes on “why is Actual Revenue lower than Tracked Revenue”?

  • Transactions that were never in Analytics cannot be attributed to anything (no search term, no campaign, no user cookie)
  • but most importantly, we this way also circumvent the risk of offline or giant API Orders accidentally messing up the “Actual Revenue” data for Analytics.

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Lukas Oldenburg

Lukas Oldenburg

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Digital Analytics Expert. Owner of dim28.ch. Creator of the Adobe Analytics Component Manager for Google Sheets: https://bit.ly/component-manager