Cash over Clicks
What this is
None of us have a lot of time to read detailed articles on tying advertising first principles to outcomes. I don’t have a great deal of time to write them either. So here’s the first in a series of short, plain‑English ways to judge digital ad spend using cash outcomes. No jargon. No glory metrics.
The Advertising First principle
Revenue and margin beat activity. If a dollar of ad spend can’t be tied to near‑term cash and medium‑term profit, it’s a bad bet.
The problem (in one minute)
Platforms celebrate clicks and views. Banks don’t.
Multiple channels claim the same sale.
Fees and middlemen chip away before an ad even loads.
“Viewable” can still mean “barely noticed.” Result: healthy dashboards, weak cash.
The fix: follow the money
Trace each dollar from invoice → impression → session → order → cash. Then answer four questions:
Incrementality: What would sales have been without this spend?
Payback: How many days until the exposed cohort earns back the ad dollar (after costs)?
Margin: What contribution is left after media, fees, and fulfilment?
Risk: How much runs on unverifiable supply or low‑quality sites/apps?
How we run the check
Define the window: Agree a standard payback horizon (e.g., 90 days for ecommerce; longer for subscription).
Cohorts, not channels: Group orders by week of exposure, then measure their cash curve over time.
Throttle by marginal ROI: Increase spend only while the next dollar pays back within the window.
Reconcile to the ledger: Match platform totals to invoices and your GL every month.
What you’ll see
A one‑page Cash Panel: working media %, cohort payback days, incremental ROAS, and fee stack.
A Supply‑Path Map: your dollar’s route to the screen, with each hop and fee.
A Spend Curve: where marginal ROI drops below your hurdle.
Some decision rules
Pause any line where payback > 90 days or iROAS < 1.0 for two straight weeks.
Shift budget away from paths with working media < 70% until renegotiated.
Require a 10–20% control in any scale test to prove lift.
What we verify
Data lineage: Every metric has a source and timestamp; numbers are reproducible.
Working media rate: Share of spend that buys actual media after all fees.
Overlap/duplication: Cross‑channel reach is deduped; you’re not paying for the same person twice.
Incrementality design: Holdouts or geo/time splits are documented and repeatable.
Contract fit: Terms reward verified outcomes, not just delivery.
The controls CFO controls should require
Ledger reconciliation: Monthly tie‑out of platform spend to invoices and GL, signed by agency and finance.
Cohort payback table: Standard report showing cumulative contribution to payback, published fortnightly.
Working media threshold: Fee stack disclosure per path; target ≥70% working media, variances explained.
Incrementality plan: Pre‑registered test design with pass/fail rules before scaling.
Metric change control: Any change to definitions or windows requires written approval from finance.
Next up: Spend the Next Dollar, Not the Last One—how to budget using marginal returns instead of averages.