POAS (profit on ad spend)

What it is

ROAS (return on ad spend) is revenue divided by ad cost. POAS swaps revenue for gross profit. Two orders with the same revenue can carry very different profit, and only POAS shows the difference.

How it works

1. Calculate profit per order: revenue minus cost of goods (and, if you choose, shipping and fees). Compute it in a script or your accounting tool, not in a chat model.
2. Send that profit as the conversion value to the ad platform. Google Ads’ value-based bidding (Maximize conversion value or Target ROAS) then optimizes for profit instead of revenue.
3. Set targets from your own history. Start from recent actual results and adjust gradually. ProfitMetrics, which sells profit-tracking software, suggests waiting for at least 100 conversions with profit data first.

From June 2026 Google labels “Maximize conversion value with a Target ROAS” simply as “Target ROAS” (checked 2026-10-17).

Worked example: at a 40% gross margin, break-even ROAS is 1 / 0.40 = 2.5. A single ROAS target across products with 20% and 60% margins is wrong for both.

Benefits

• Bids follow profit, so budget shifts toward products that make money.
• A clearer weekly report. An AI assistant can explain POAS by campaign once the numbers come from a trusted source.

Limits and risks

• Garbage in, garbage out. Wrong cost data trains the bidder in the wrong direction.
• Fewer conversions to learn from if you also cut low-margin products.
• Doesn’t prove causation. Use incrementality tests to check that ads caused the sales.

This page explains an advertising metric as published by the platforms. It isn’t financial, tax or accounting advice; check margin figures with your accountant.