How should a board evaluate paid-media dependence in ecommerce?
Answer: The board should understand how much revenue and contribution would remain if paid acquisition became materially more expensive or less effective. High paid-media use is not inherently bad; it becomes a governance issue when growth requires continuously rising spend, reported ROAS obscures contribution, or the company cannot separate demand creation from demand capture. Boards should focus on marginal economics, customer quality and the share of growth that depends on advertising conditions outside management’s control.
Why this matters
Paid media can scale revenue faster than brand demand or customer economics. That can make growth look durable until auction costs rise or platform performance changes.
What the board should examine
- Advertising spend as a percentage of revenue and contribution
- Marginal CAC or marketplace advertising efficiency
- New versus returning customer economics
- Organic demand trends
- Sensitivity to a meaningful increase in media costs
What good looks like
Management can explain the incremental profit generated by paid media, how performance changes at the margin, and how much growth would persist under less favorable acquisition economics.
Related questions
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