POAS
POAS, Profit on Ad Spend, measures profit per unit of ad spend. It is calculated as the gross profit of ad-driven orders divided by advertising cost. Unlike ROAS, which works with revenue, POAS accounts for margin, so it separates revenue that earns money from revenue that merely flows through the company.
In short
| Formula | POAS = gross profit of orders / advertising cost |
| How it differs from ROAS | ROAS = revenue / cost. POAS = profit / cost. ROAS cannot see margin, POAS is built on it |
| Where it matters most | Shops with varied margins across the range, where the same ROAS means different profit |
| What it requires | Margin data in measurement: send conversion value as profit, or join margin later in reporting |
How it is calculated
Formula and inputs
The numerator is the gross profit of the orders the advertising brought in: revenue net of VAT minus the cost of goods sold. A stricter variant also subtracts the order's variable costs (shipping, packaging, payment fees, returns), which means it works with contribution margin. Both variants are acceptable, but the account has to use one and the same definition across all campaigns; otherwise POAS cannot be compared between them. The denominator is the advertising cost for the same period and the same campaigns. In practice the numerator comes from one of two places: either the conversion value is sent to the platform directly as the order's margin (per item from the product feed when margins vary across the catalog), or the ad-driven orders are joined with margin later in reporting.
Example calculation
Worked example: one e-commerce campaign over one month.
| Advertising cost | €8,000 |
| Revenue of credited orders, net of VAT | €40,000 (ROAS 5.0) |
| Cost of goods sold (60% of revenue) | €24,000 |
| Gross profit = revenue minus cost of goods | €16,000 (40% margin) |
| POAS = 16,000 / 8,000 | 2.0 |
| Left after paying for the ads | €8,000 |
If the same account worked with contribution margin and also subtracted €4,000 for shipping, packaging and payment fees, profit would drop to €12,000 (30%) and POAS to 1.5. The number moved by a quarter purely through a change of definition; the campaign did not change. That is why the margin definition is set once and kept across all campaigns and over time.
Interpretation and what not to confuse it with
POAS is also ROAS times margin: 5.0 × 0.40 = 2.0. This gives a quick check for any campaign: the zero line, break-even ROAS, equals 1 / margin, so 2.5 at a 40% margin and 3.33 at 30%. A campaign with ROAS below that line loses money no matter how it looks in the report. POAS 2.0 reads as two euros of gross profit for every euro of advertising, before that advertising is paid for. It is not ROI: ROI subtracts the ad cost: ROI = (profit minus cost) / cost = POAS minus 1, which is 100% in the example. And it is not company profit: fixed costs still have to be paid out of the €8,000 left over.
Why ROAS misleads and POAS does not
A worked example we use when explaining it: two campaigns, both at ROAS 5. One sells electronics at a 10 percent margin, the other cosmetics at 40 percent. At 10,000 EUR spend each brings 50,000 EUR in revenue. The first leaves 5,000 of gross profit, less than it costs: POAS 0.5 and a real loss. The second leaves 20,000: POAS 2.0 and a healthy profit. Same ROAS, opposite outcomes. Optimizing for ROAS pushes budget into the first campaign exactly as eagerly as into the second. Optimizing for POAS tells them apart.
From our own practice
Moving from ROAS to profit-based bidding is, across EUR 52 million of managed spend, the most common structural change we make for e-commerce clients: conversion values stop being sent as revenue and start carrying margin, or margin gets joined in the data warehouse. The usual consequence: some campaigns with the prettiest ROAS turn out to be loss-making because they sell low-margin products, and budget flows to where profit is actually made. Smart Bidding can optimize toward whatever value you send it, so the change is a data change, not a campaign rebuild.
Common mistakes
- A target POAS without knowing fixed costs. POAS 1.0 covers the advertising, not the company. The target has to account for overhead.
- Mixing gross and net margin. The formula works with either, but it must be the same one across campaigns.
- Switching overnight. Changing conversion values resets algorithm learning. The transition is gradual.
Related terms
See also ROAS, contribution margin, break-even ROAS, MER and incrementality.
Frequently asked questions
What is a good POAS?
Above 1.0 the advertising pays for itself, but a healthy value depends on fixed costs and growth goals. A scaling company can deliberately run lower than one harvesting profit.
Do I need a special tool for POAS?
Not necessarily. Sending margin-based conversion values to the ad platforms, or joining margin in reporting, is enough. Tools make it easier, but the principle is a data one.
Does POAS replace everything else?
No. It is a campaign metric. Above it belongs the account-wide view through MER, below it the unit economics of products.
How we can help
Moving campaigns to profit-based management is routine work for us. Details on the Performance marketing agency page.