The retail media industry has rapidly embraced incremental return on ad spend (iROAS) as the next evolution beyond traditional ROAS metrics. But new research from Albertsons Media Collective, Ovative, and Kellogg School of Management reveals that this solution has created a new problem: Not all iROAS measurements are created equal, and the same campaign can show wildly different outcomes depending on the methodology used.

"We analyzed 42 different campaigns, and what we found is that when it comes to iROAS, there are wild inconsistencies based on methodology," said Liz Roche, vice president of media and measurement at Albertsons Media Collective, in conversation with our analyst Sarah Marzano at EMARKETER's Ad Buyer Strategies Summit. "The methodology behind iROAS can actually shift results up to 6x. It can even flip a positive iROAS into a negative one."

Sarah Marzano, Steve Baxter, and Liz Roche speaking at EMARKETER's Ad Buyer Strategies Summit

iROAS' initial promise

For years, ROAS served as the default performance metric across retail media networks (RMNs), primarily because it was easy to calculate and compare across platforms. But as advertisers expanded from working with two or three networks to five, six, or even eight partners, the limitations of ROAS became impossible to ignore.

"[ROAS is] pretty easy across channels, but doesn't really tell us much about the efficacy of media," Roche said. "It's an efficiency metric at large."

iROAS emerged as the industry's answer, designed to measure the causal impact of media rather than just correlation. The metric aims to show what sales were actually driven by advertising, not just what sales happened to occur during a campaign period.

The shift from ROAS to iROAS represents the industry's attempt to move beyond vanity metrics toward true performance measurement. But the execution has revealed a deeper problem.

Decision risk for advertisers

When the same campaign can show dramatically different performance depending on calculation methods, advertisers face a fundamental trust problem. They're spending more time debating methodologies than making strategic decisions about where to allocate budgets.

"Delays and decisions ultimately come down to business risk," said Steve Baxter, Executive Vice President of Retail Media at Ovative. "If we're delaying on the insights that we have and not actioning on those, that's an actual business problem, and business risk and opportunity we're leaving on the table."

Brands are taking accountability rather than waiting for industry standardization

Two major trends are emerging on the buy side as advertisers grapple with measurement inconsistency:

• Awareness: Brands are recognizing that retailers may use the same terminology while calculating metrics in fundamentally different ways.
• Accountability: Rather than waiting for the industry to solve the problem, brands are creating their own normalized measurement frameworks to compare performance across partners.

"Brands are now saying, 'Hey, the industry is not going to solve this for us,'" Baxter said. "We need to take accountability with all the data that we now have to create a metric system that we believe in and come up with our own kind of normalized iROAS concept across our partners, so that we can just make more nimble decisions for the sake of the business."

The rails of transparency

The measurement confusion has created mistrust between buyers and sellers, particularly in retail media's early days when ROAS numbers "through the roof" strained credibility.

"There's been mistrust between the buy side and the sell side because of the confusion of metrics," Baxter said. "There are advertising dollars up for grabs, and the dollars are going to flow towards performance. But that flow happens on the rails of trust."

RMNs that can clearly explain their methodologies and answer basic questions about how metrics are calculated will have an advantage in capturing advertiser budgets.

Rather than pursuing a perfect universal metric, the industry needs to focus on education, transparency, and collaboration.

"The onus is on us to do some education when needed, because there are a lot of different brands within the Albertsons ecosystem, and some have more sophisticated data science resources, and some don't," Roche said. "How do we be as transparent as possible so you can make the best buying decisions?"

Experts say brands need to take accountability for creating their own normalized measurement frameworks and asking the right questions about methodology. The conversation needs to start with business objectives, moving units and acquiring new customers, rather than getting lost in media metrics.

Watch the full session.