Custom vs. Lookalike Audiences: Which Delivers Better ROAS for Your Online Store in 2025?
Introduction Audience targeting plays a crucial role in digital advertising success. For e-commerce businesses, reaching the right people with the right message directly impacts Return on Ad Spend (ROAS). Two of the most effective audience strategies are Custom Audiences and Lookalike Audiences. While both offer distinct advantages, marketers often wonder which delivers better ROAS in 2025. This guide breaks down their differences, performance trends, and practical strategies to help you make informed decisions for your online store. Understanding Custom and Lookalike Audiences What is a Custom Audience? A Custom Audience is a group of users who have already interacted with your brand. These audiences are created using first-party data such as: Custom Audiences allow businesses to target high-intent users who are already familiar with their products or services. These audiences are especially useful for retargeting campaigns, increasing customer retention, and upselling. Advantages of Custom Audiences: Challenges of Custom Audiences: Real-Life Example: A popular online clothing store noticed a high cart abandonment rate. To recover lost sales, they created a Facebook Custom Audience targeting users who added products to their cart but didn’t complete the purchase. They ran retargeting ads offering a 10% discount, resulting in a 30% recovery of abandoned carts and a significant boost in ROAS. What is a Lookalike Audience? A Lookalike Audience is a group of new potential customers who share similarities with an existing audience. Platforms like Facebook Ads and Google Ads analyze behavior, interests, and demographics to find users who are likely to convert. Lookalike Audiences are ideal for expanding reach, acquiring new customers, and scaling ad campaigns. The effectiveness of these audiences depends on the quality of the seed data (i.e., the original audience used to create the Lookalike). Advantages of Lookalike Audiences: Challenges of Lookalike Audiences: Real-Life Example: A fitness brand wanted to acquire new customers. They created a Lookalike Audience based on their top 1,000 loyal customers. Their Facebook ads reached new users with similar interests, leading to a 20% increase in first-time purchases and an overall ROAS boost. ROAS Comparison: Custom vs. Lookalike Audiences Measuring ROAS for Each Audience ROAS (Return on Ad Spend) = Revenue from Ads / Cost of Ads A high ROAS means a campaign is generating more revenue than its cost. Measuring ROAS involves tracking key performance indicators such as: Performance Analysis: Trends in 2025 Custom Audiences: Lookalike Audiences: When to Use Custom Audiences vs. Lookalike Audiences Factor Custom Audience Lookalike Audience Budget Suitable for lower budgets Works better with a larger budget Ad Objective Retargeting, loyalty campaigns Expanding audience reach Data Availability Requires existing data (emails, visitors) Works with seed data (e.g., high-value customers) ROAS Potential Higher for warm leads Requires testing & optimization Practical Tips for Better ROAS in 2025 For Custom Audiences: For Lookalike Audiences: Real-Life Example: A beauty brand tested different Lookalike Audience sizes (1% vs. 5%). They found that a 3% similarity provided the best balance of cost and conversions. By creating separate Lookalike Audiences for high-spending customers and frequent buyers, they improved their ROAS by 25%. General Optimization Tips: Conclusion Both Custom and Lookalike Audiences play a significant role in maximizing ROAS for online stores. Custom Audiences excel in conversions and retention, while Lookalike Audiences help expand reach and acquire new customers. For businesses aiming for the highest ROAS in 2025, a hybrid approach works best: leverage Custom Audiences for nurturing and retention while continuously testing Lookalike Audiences to reach fresh prospects. The key to success lies in continuous testing, segmentation, and optimization to maximize digital advertising performance.