For years, Return on Ad Spend (ROAS) has been the go-to metric for measuring the success of shopping campaigns. But here’s the problem: ROAS only tells part of the story—it focuses on revenue, not profit.
E-commerce managers striving for true performance and long-term growth need a better metric: Profit on Ad Spend (POAS). Unlike ROAS, POAS accounts for actual profit margins, providing more accurate, data-driven insights that lead to smarter optimization and better business decisions.
In this article, we’ll break down what POAS is and how it works, why it is a better metric for e-commerce success and how it helps you optimize campaigns more effectively.
What is POAS and how does it work?
POAS (Profit on Ad Spend) = total profit / ad spend
Instead of measuring revenue like ROAS, POAS measures profitability—taking into account costs like:
- Product costs (COGS)
- Shipping & fulfilment fees
- Payment processing fees
- Other overhead costs
By focusing on profit rather than just revenue, POAS provides a clearer view of your campaign’s true financial performance.
POAS vs. ROAS: what’s the difference?
ROAS focuses on revenue growth but ignores profit margins. POAS focuses on profitability but requires accurate cost tracking. An example:
You spend €1,000 on ads and generate €5,000 in sales. Your ROAS = 5.0 (looks great, right?)
But if your costs (COGS, shipping, etc.) add up to €4,000, your actual profit is only €1,000. That means your POAS is just 1.0—far less impressive!
With ROAS, you might assume your campaign is performing well. But POAS reveals the reality—helping you optimize for true profit, not just high revenue.
Why POAS is the better metric for e-commerce success
- Accurate, data-driven reporting: POAS removes guesswork by showing actual profitability.
- Transparency for all stakeholders: Clear visibility for marketing teams, finance, and management.
- Better optimization at the product level: Instead of cutting a campaign based on revenue, POAS helps identify which products are truly driving profit.
- Quick adaptation to changes: Stay agile in dynamic ad environments like Google Shopping, where costs and competition fluctuate daily.
- Holistic view of success: POAS provides both a deep dive into numbers and a high-level overview of campaign impact.
At Us, we focus on performance, technology, and control. We set up automatic trackers that display the costs and profits per product, allowing us to maximize profit and manage expenses at a more bottom-line level.
How to implement POAS in your shopping campaigns
- Track costs accurately: ensure COGS, shipping, and other costs included in reporting. Use automated tracking tools to avoid errors.
- Segment campaigns by profitability: instead of bidding based on ROAS, adjust bids based on product profit margins.
- Use smart bidding strategies: Google Ads’ Target ROAS doesn’t account for profit—consider custom scripts or automation tools to optimize for POAS.
- Continuously test & adjust: monitor seasonality, competition, and ad performance regularly. Adapt your strategy based on profit trends, not just revenue growth.
Ready to move beyond ROAS? If you’re still measuring shopping campaigns using ROAS alone, you’re missing out on key insights that could drive higher profitability.
Switching to POAS allows you to optimize ad spent for maximum profit, improve transparency and decision-making and react faster to market changes. It’s time to move beyond revenue-focused metrics and start measuring what really matters: profit!
Need help implementing POAS in your campaigns? Get in touch for a personalized strategy!
