ROAS vs POAS: What do you need to know? 

POAS vs ROAS. For an online marketing rookie, these sound like random syllables that spill out of a marketer's mouth without any particular meaning. But for anyone investing in online advertising, both metrics are crucial.

In this blog we explain the difference between ROAS and POAS and help you decide which metric is most relevant for your business.

What is ROAS?

ROAS stands for Return on Ad Spend. It measures how much revenue you generate for every euro you spend on advertising.

Formula: ROAS = Revenue / Ad spend

For example: if you spend €1,000 on ads and generate €4,000 in revenue, your ROAS is 4 (or 400%).

ROAS is one of the most widely used metrics in e-commerce advertising. It's easy to calculate and gives a quick indication of whether your campaigns are profitable.

The limitations of ROAS

ROAS sounds simple, but it has an important limitation: it only looks at revenue, not profit. A ROAS of 4 sounds good, but if your product has a margin of 20%, you're actually losing money.

Let's calculate:

• Revenue: €4,000
• Ad spend: €1,000
• Product costs (80% of revenue): €3,200
• Gross profit: €800
• Net result after ad spend: -€200

With a ROAS of 4 you're still losing money. This is where POAS comes in.

What is POAS?

POAS stands for Profit on Ad Spend. Instead of revenue, it measures profit relative to your advertising costs.

Formula: POAS = Gross profit / Ad spend

Using the same example:

• Gross profit: €800
• Ad spend: €1,000
• POAS: 0.8

A POAS of less than 1 means you're spending more on advertising than you're earning in profit. You need a POAS of at least 1 to break even.

Why POAS gives a more accurate picture

POAS takes into account:

• Product costs
• Shipping costs
• Payment provider fees
• Return rates

This gives a much more accurate picture of the actual profitability of your advertising campaigns.

The challenge with POAS

The practical challenge of POAS is that you need your margin data. This requires:

1. Knowing your margins per product or product category
2. Linking this data to your advertising platforms
3. A more advanced technical setup (often via a data layer or CRM integration)

This is more complex than ROAS, but for companies that want to grow profitably, it's worth the investment.

Which metric should you use?

Use ROAS when:

• You have relatively uniform margins across your product range
• You're just getting started and want to keep it simple
• You're optimising primarily for revenue growth

Use POAS when:

• Your margins vary significantly between products
• Profitability is more important than revenue growth
• You have the data and technical capacity for more advanced tracking

The ideal situation: use both. ROAS as a quick indicator, POAS for strategic decisions.

How to get started with POAS

1. Map your margins per product or category
2. Pass this data to Google Ads via your data layer (as custom value)
3. Set up your bidding strategy based on profit values rather than revenue values
4. Monitor and optimise based on POAS targets

Need help implementing POAS tracking?

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