POAS (Profit on Ad Spend)

What is POAS (profit on ad spend)?

POAS (profit on ad spend) is gross profit divided by ad costs. Where ROAS looks at revenue, POAS looks at what remains after cost of goods. A POAS above 1 means the ads earned more gross profit than they cost. For this you need to build margin into the conversion value.

Why is POAS important?

• Steers on profit: low-margin products do not get the same bids as high-margin products.
• Fairer than ROAS: two orders with the same revenue can have a very different return.
• Works with Smart Bidding: by passing on margin as the conversion value.

Examples of POAS

• €1,000 in ad costs and €2,500 in gross profit gives a POAS of 2.5.
• A tent of €200 with €30 gross profit and shoes of €100 with €50 gross profit, each with €20 in ad costs: the tent has a ROAS of 10 and a POAS of 1.5, the shoes a ROAS of 5 and a POAS of 2.5.

How do you use POAS?

Pass on the margin per product as the conversion value in your conversion tracking, so Google Ads can steer on profit. Then set a target ROAS based on those values. Check that the margins in your store are correct, or the POAS will be wrong too. Read more about e-commerce stores.