Many Australian small and medium enterprises invest in paid search (like Google Ads), social media advertising, and email marketing. But knowing which channel delivers the best return isn’t always straightforward. It’s tempting to look at simple metrics like clicks or likes, but true comparison hinges on profitability – what revenue each channel generates versus its cost. We’ll outline how to do this effectively.
The key is to move beyond vanity metrics and focus on return on ad spend (ROAS) and customer lifetime value (CLTV). These are core concepts for understanding channel performance. ROAS tells you how much revenue you get back for every dollar spent on advertising. CLTV predicts the total revenue a single customer will generate throughout their relationship with your business. Comparing these across channels gives a much clearer picture.
Here’s how we recommend approaching the comparison:
- Consistent Cost Tracking: Accurately record *all* costs associated with each channel. This includes ad spend, agency fees (if applicable), software subscriptions, and even the internal time spent managing each campaign. Don’t underestimate labour costs – they’re a significant factor.
- Attribution Modelling: Understand how each channel contributes to a sale. Is it the first touchpoint, the last, or somewhere in between? Consider using a multi-touch attribution model to give credit where it’s due. Many platforms offer this functionality, or there are third-party tools available.
- Calculate ROAS: For each channel, divide the revenue generated by the total cost. For example, if you spent $2,000 on Google Ads and generated $8,000 in revenue, your ROAS is 4:1. A higher ROAS indicates better profitability.
- Factor in CLTV: A channel might have a lower initial ROAS but attract customers with a higher CLTV. Email marketing, for instance, often has a lower ROAS but excels at nurturing customer relationships and driving repeat purchases.
It’s also important to remember that channels work best in combination. A customer might discover you through a social media ad, then convert after receiving an email offer. Don’t silo your analysis; look for synergistic effects. As we move into 2026, integrated marketing strategies will become even more crucial.
Ultimately, comparing profitability isn’t about declaring a ‘winner’. It’s about understanding where to allocate your marketing budget for the greatest overall return. We recommend starting with a detailed cost and revenue analysis for each channel, then refining your strategy based on the insights you uncover. A clear understanding of ROAS and CLTV will empower you to make data-driven decisions and maximise your marketing investment.
