How to optimize for ROAS in Google Ads using LTV insights

Maximizing return on ad spend (ROAS) in Google Ads is crucial for driving profitability. 

However, without revenue data, PPC advertisers often default to focusing on cost per purchase – a strategy that can limit long-term growth. 

While ROAS optimization enhances ad spend efficiency, it falls short if it doesn’t account for customer lifetime value (LTV). 

To stay competitive, you must move beyond short-term returns and embrace LTV-based ROAS optimization. This ensures you’re capturing the full value of your customers over time.

This article will break down how to:

• Shift from short-term ROAS to LTV-based ROAS.
• Use static conversion values to improve bidding performance.
• Optimize ROAS by product type or customer segment.
• Ensure minimum campaign criteria are met for optimal performance.
• Implement advanced strategies like predictive analytics, incrementality testing, and competitive benchmarking.

Why ROAS outperforms cost per purchase

Focusing solely on cost per purchase can be misleading, as it emphasizes immediate expenses without considering the revenue generated. 

This narrow view might lead you to prioritize low-cost acquisitions, potentially sacrificing quality and long-term profitability.

In contrast, ROAS provides a holistic perspective by evaluating the efficiency of your ad spend in generating revenue. 

For instance, spending $100 to generate $400 results in a ROAS of 4.0 (or 400%), indicating a strong return. 

This metric aligns your advertising efforts with profitability, ensuring that each dollar spent contributes effectively to revenue goals.

Including taxes and shipping fees: A double-edged sword

A critical consideration in ROAS calculation is whether to include taxes and shipping fees in your conversion values. 

This decision can significantly impact your perceived ad performance.

Pros

• Accurate revenue representation: Including these fees accurately reflects the total revenue per purchase, aligning your ROAS calculations with actual financial outcomes.
• Enhanced budget allocation: A comprehensive revenue view enables more informed decisions regarding budget distribution and campaign scaling.

Cons

• Inflated revenue figures: Incorporating these fees can artificially boost revenue numbers, potentially leading to overestimated ROAS and misguided strategy adjustments.
• Misalignment with profit margins: Taxes and shipping fees don’t contribute to profit margins, so their inclusion might distort the true profitability of your campaigns.

The optimal approach varies by business model. 

Analyze both methods and choose the one that aligns best with your financial tracking and advertising objectives.

Integrating LTV into ROAS optimization

Optimizing for immediate ROAS without considering LTV can be short-sighted. 

Your customers often make multiple purchases over time, contributing far more to your revenue than their initial transaction alone.

Integrating LTV into your ROAS optimization allows you to make more strategic, informed decisions about advertising investments. 

Understanding your customers’ long-term value allows you to allocate your budget more effectively, ensuring acquisition efforts focus on audiences who will generate the highest cumulative revenue – not just short-term returns.

Leveraging LTV insights also gives you a competitive edge. 

When you bid based on LTV rather than short-term ROAS, you can afford higher acquisition costs, enabling you to outbid competitors who are fixated on immediate profitability. 

This approach helps attract high-value customers that others might overlook due to restrictive bidding strategies.

Dig deeper: 5 KPIs to measure paid media success and 5 to measure business success

Calculating and applying LTV-based ROAS

To effectively incorporate LTV into your ROAS strategy, follow these steps.

1. Determine your two-year customer lifetime value

To calculate LTV over two years, you should analyze historical data to determine the average revenue per customer, factoring in repeat purchases and retention rates. 

Identifying distinct customer segments allows you to tailor marketing efforts, prioritize high-value customers, and optimize ad spend efficiency. 

Since not all customers contribute equally to long-term revenue, focusing on the most valuable segments ensures smarter budget allocation and better overall returns.

2. Set a target ROAS based on LTV

To optimize for LTV-based ROAS, you first need to define your acceptable acquisition costs by determining what percentage of LTV you’re willing to invest in acquiring a customer.

For example, if your two-year LTV is $500 and you allocate 30% to acquisition, your target ROAS would be 3.33 (333%).

Once you’ve set this target, align your campaign goals by adjusting bids and budgets accordingly. 

This ensures your ad spend is optimized for long-term profitability rather than just immediate returns.

3. Migrating to custom LTV-based conversion values

A key shift in optimizing for LTV-based ROAS is moving away from dynamic conversion values and implementing custom LTV values for better accuracy and strategic alignment.

By making this transition, you can fundamentally change how your Google Ads campaigns optimize bids. 

Rather than chasing short-term revenue, Google’s algorithm will prioritize customers who deliver sustained value over time – leading to more profitable customer acquisition, smarter budget allocation, and stronger long-term ROAS performance.

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Attributing LTV by custom factors

Not all products and customers contribute equally to LTV. 

Some naturally lead to repeat purchases, while others are typically one-time buys.

Understanding these differences is essential for optimizing your ad spend.

• High-LTV products often encourage repeat purchases or have complementary items that increase long-term value.
• Low-LTV products may not generate additional sales after the initial purchase.

To maximize these insights, start by segmenting your product portfolio to identify which items drive higher LTV. 

From there, develop tailored marketing strategies focusing on customer retention and upselling for high-LTV products.

Target ROAS: Meeting minimum Google Ads campaign criteria

For ROAS optimization to be effective, it must meet Google’s minimum campaign requirements for the Target ROAS bidding strategy.

Here are Google’s published requirements for Target ROAS bidding by campaign type:

To use Target ROAS bidding, most campaign types need at least 15 conversions in the past 30 days.

• Search campaigns: if you recently started reporting conversion value or changed the way conversion value is reported, we recommend you include the new values in the “Conversions” column and wait for 4 weeks or 3 conversion cycles for your campaign to receive conversion values at a similar rate before adopting.
• Display campaigns: At least 15 conversions (with valid conversion values) in the past 30 days across all of your campaigns combined. New Display campaigns no longer require you to have a history of conversions to use Target ROAS bidding.
• App campaigns: At least 10 conversions every day (or 300 conversions in 30 days).
• Demand Gen campaigns: At least 50 conversions in the past 35 days (10 of these conversions must have occurred in the past 7 days) in the campaign, or 100 conversions in the past 35 days (across all Demand Gen campaigns in the customer account).
• Video Action Campaigns: At least 30 conversions in the past 30 days.
• Hotel campaigns: At least 50 conversions per week at a campaign level.
• Travel campaigns: At least 50 conversions in the past 7 days at a campaign level.

Accurate conversion tracking is crucial.

Without it, data inconsistencies can lead to misinformed optimizations and poor campaign performance.

Budget flexibility is another key factor.

If your budget is too constrained, Google’s machine learning algorithms won’t have the room to test, learn, and optimize bids effectively.

Failing to meet these minimum criteria can lead to erratic ROAS performance, wasted ad spend, and inefficient bidding.

When Google’s algorithm lacks the necessary data, it struggles to optimize for high-value conversions, making it harder to hit your ROAS targets.

Dig deeper: How to evolve your PPC measurement strategy for a privacy-first future

Advanced strategies for LTV-based ROAS in 2025

Stand out in 2025 with these powerful strategies to win high-LTV new customers – because repeat buyers need a whole different playbook.

Predictive analytics with first-party data

Leverage CRM insights and past purchase history to build predictive models – think Google’s Customer Match or a custom AI model – that score new prospects for LTV potential right from their first interaction. 

Bid aggressively on users flagged as high-value customers to maximize your ad spend efficiency and build a customer base that drives long-term revenue.

Zero-party data for precision

Why guess what your customers want when you can just ask them?

Add quizzes, post-purchase surveys, and preference forms into your funnel to capture intent directly.

Even a simple question like, “Which product category excites you most?” can power audience segmentation without invasive tracking.

Use this data to build high-LTV lookalike audiences and scale smarter – no cookies required.

Contextual targeting revival

With privacy changes limiting broad targeting, context is king again. 

Rather than relying solely on audience signals, test ads on niche sites or YouTube channels that align with high-LTV interests (e.g., luxury travel blogs for premium buyers).

Combine this with past conversion data to prioritize placements and minimize wasted spend.

Measure marketing effectiveness holistically 

Relying on UTM tracking and last-click attribution alone will lead to flawed decisions and inefficiency. 

Shift to holistic measurement strategies and data-driven attribution (like Google Analytics 4) to account for all touchpoints – awareness ads, consideration clicks, and conversions. 

Every marketing effort impacts your bottom line, so focus on areas that deliver the biggest return, such as Add to Cart performance or email opt-in rates.

Skip conversion value rules

Google’s Conversion Value Rules feature can adjust bid strategies based on LTV signals, but manual adjustments are often better. 

Why? 

Because most LTV factors aren’t tied to geos, devices, or audience segments. This feature can also skew your conversion value reporting. 

Instead, set conversion values manually based on internal data analysis for a more accurate reflection of true customer value.

Incrementality testing

Don’t let inflated ROAS figures fool you.

Some conversions would have happened organically. 

Run holdout tests like geo-split experiments to uncover your ads’ true impact. 

If a campaign targeting new customers isn’t driving incremental sales, shift your budget to top-funnel growth tactics that will.

Dig deeper: Incrementality testing in advertising: Who are the winners and losers?

Adjust for seasonality

“Set it and forget it” won’t cut it in 2025. 

Seasonal demand changes can drastically affect ROAS performance. 

During peak shopping periods (e.g., Black Friday, Cyber Monday, and the holidays), consumers often spend more, inflating ROAS figures.

To stay efficient, adjust your LTV ROAS targets dynamically. 

Relax your targets slightly during peak seasons to capture more of the market, then tighten them in off-seasons to maintain efficiency and avoid overspending when demand is low.

Use competitive benchmarking

Staying ahead means knowing how your ROAS compares to competitors. 

If your rivals outbid you on high-LTV products, they may sacrifice short-term ROAS to win valuable customers. 

If your bidding strategy is too conservative, you risk losing long-term revenue opportunities.

Regularly monitoring competitor activity allows you to adjust bids strategically – ensuring you stay competitive without overspending.

Dig deeper: How to benchmark PPC competitors: The definitive guide 

The future of ROAS optimization is LTV-driven

To scale profitably in 2025 and beyond, you must move beyond short-term ROAS and focus on long-term value. 

Prioritizing customers who deliver sustained revenue – not just immediate returns – is key to lasting success.

Winning brands succeed by understanding customer lifetime value at a granular level and applying data-driven bidding strategies. 

This requires moving past last-click attribution, leveraging first- and zero-party data, and using predictive analytics to target high-value customers from the start.

Success comes down to discipline, smart data use, and ongoing testing and refinement. 

Brands that commit to this approach won’t just improve ad performance. They’ll build a stronger, more scalable business with ad dollars that work harder and go further. 

Play the long game, and profitability will follow.