POAS Profit on Ad Spend
Profit on ad spend puts gross profit where ROAS puts revenue.
POAS = gross profit ÷ ad spend
Or, if you already have the ROAS: POAS = ROAS × gross margin. A 4x ROAS at a 35% margin is a POAS of 1.4, meaning $1.40 of contribution comes back for every dollar spent. Forty cents of that is left after the advertising pays for itself.
The whole metric is the number 1
That is the argument for it. Better than it first sounds.
- Above 1, the campaign contributes after variable costs
- At 1, it exactly pays for itself
- Below 1, it destroys money, whatever the ROAS looks like
Compare that to working with ROAS, where the threshold is a different number for every product and you have to calculate it before you can read the result. A 5x ROAS on an 18% margin product sounds strong. The break-even is 5.56x, so it is not. As POAS the same campaign reads 0.9. Nobody needs a calculator for that one.
Where it differs from ROMI
It does not, mathematically. ROMI is the identical quantity written as a percentage with its break-even at zero instead of one:
| POAS | ROMI | |
|---|---|---|
| Formula | gross profit ÷ ad spend | (ROAS × margin − 1) × 100 |
| Result | multiple, e.g. 1.4 | percentage, e.g. 40% |
| Break-even | 1 | 0% |
Choose one and hold to it. Preferring POAS makes sense where a team already thinks in multiples, because it sits on the same scale as ROAS and nobody has to change gear.
Optimising to it directly
The more interesting use is not reporting but bidding. Google’s smart bidding optimises towards whatever value you send it as the conversion value, and most accounts send revenue by default. Send contribution instead (order value minus cost of goods, shipping and payment fees) and the algorithm starts chasing profit rather than turnover.
It is not free. Your conversion tracking needs per-product cost data, which many shops do not have wired up, and a wrong cost figure feeds a wrong signal to the bidding at scale. Worth doing on a catalogue with wide margin spread, less so where every product margins out the same.
What it still does not see
POAS stops at gross profit. Fixed costs, overheads, the cost of the people running the campaigns — none of that is in it, so a POAS above 1 is not the same as a profitable business. It is the campaign layer doing its part, and the rest of the P&L still has to work out.