POAS vs ROAS: profit on ad spend explained

POAS (profit on ad spend) = contribution profit ÷ ad spend = ROAS × contribution margin. Break-even POAS is 1.0; ROAS has no universal break-even.

ROAS says how much revenue the ads brought in. POAS says whether any of it was left once the product and the order were paid for. It is aimed at PPC specialists and shop owners who already track ROAS and wonder when it stops being enough. Every figure uses round numbers, so the maths fits on the back of an envelope.

For your own numbers, the break-even ROAS calculator takes revenue, VAT, ad spend, product margin, returns, reverse logistics, shipping, payment fees and the profit you want to keep. It returns break-even ROAS, target ROAS, POAS (contribution margin ÷ ad spend, break-even 1.00) and ROI on ad spend. If you haven’t worked out margins yet, start with break-even ROAS per product.

What is POAS?

POAS is the profit your ads’ sales leave, divided by what the ads cost. In this guide, profit means contribution profit: revenue minus cost of goods and variable order costs (shipping, payment fees, returns), all excl. VAT and before ad spend. So POAS = contribution profit ÷ ad spend = ROAS × contribution margin.

• ROAS = revenue ÷ ad spend. €4,000 of revenue from €1,000 of ads is a ROAS of 4.
• POAS = contribution profit ÷ ad spend. The ad spend is the same in both, so only the figure on top changes.

ROAS is still useful: it needs only two numbers that every ad account already reports. What it can’t do is separate a euro of revenue earned on a thin margin from one earned on a high margin.

One order, three POAS figures

People use POAS for three different ratios, and they give different numbers. Take one order: revenue €100 excl. VAT, cost of goods €45, shipping €8, payment fees €3, a €4 return allowance and €20 of ad spend. ROAS is 5.

Divide each profit by the €20 of ad spend and you get three POAS figures.

Break-even POAS is 1.0 only when profit is counted before ad spend and after every variable cost, which is the contribution definition. On gross profit, 1.0 overstates: this order breaks even at 1.375, because €15 of shipping, fees and returns sits between the two profits. On profit after ad spend, break-even is 0, and the ratio equals POAS − 1, the ROI on ad spend.

Google Ads’ gross profit counts cost of goods only

A ratio built on Google’s gross profit comes out higher than POAS on contribution profit. Google Ads Help, Set up and test reporting with conversions with cart data says the cost of goods sold (COGS) attribute “represents the cost of the product you are selling” and that Google Ads computes profit as “profit = revenue - COGS”. The Help pages we read don’t mention shipping, payment fees or returns.

About conversions with cart data says that combining cart data with the COGS from your Merchant Center feed lets Google Ads “generate additional metrics based on gross profit”. On the example order that gross profit is €55, against €40 of contribution profit.

To get the 2.0 used in this guide, subtract shipping, payment fees and returns from Google’s gross profit before dividing by ad spend.

What is break-even POAS?

Break-even POAS is 1.0: contribution profit equals ad spend, so the sale has paid for the product, its variable order costs and the ad. ROAS has no such fixed point, because its break-even moves with the margin: the same ROAS can be a profit on one product and a loss on another.

Take three products that each turn €1,000 of ad spend into €4,000 of revenue.

Illustrative data.

A ROAS report ranks these three as equals. A POAS report shows that A loses €200 on its €1,000 of ad spend, while C leaves five times what B does.

How do you calculate POAS from ROAS and margin?

Multiply ROAS by contribution margin: POAS rises in a straight line with ROAS, and the margin sets how steep that line is. Find your ROAS in the left column and your margin along the top; the cell is the POAS (ROAS × margin). Cells in italics are below 1.0, where the sale doesn’t cover the ad.

A 20% margin product needs a ROAS of 5 to reach POAS 1.0, a 50% margin product only 2. Pushing a low-margin product to a higher ROAS is a slow way to reach profit, and one ROAS target for the whole account keeps paying for products below their break-even.

Rearranged, POAS 1.0 means margin = 1 ÷ ROAS, so a shop running at 4 needs 25%. Products with a 22% margin are below break-even however healthy 4 looks in the account.

What is a good POAS?

A POAS of 1.0 means the ads paid for themselves. The contribution margin already takes out the costs of each order: cost of goods, shipping, payment fees and returns, all excl. VAT. What it leaves in are the costs that don’t change per order, such as rent, salaries and software, and the profit you want to keep. Those have to come out of the margin too, so a good POAS sits above 1.0.

To put them in a formula, take them as a share of revenue excl. VAT: the overhead share. A shop with €1,000,000 of revenue a year, €100,000 of fixed costs and a profit goal of €50,000 has an overhead share of (€100,000 + €50,000) ÷ €1,000,000 = 15%.

Required POAS = margin ÷ (margin − overhead share). The matching ROAS is 1 ÷ (margin − overhead share), the target ROAS formula used in how to set a target ROAS from your margin.

Example: a 40% margin with an overhead share of 15%. On €1,000 of revenue, contribution profit is €400 and fixed costs plus wanted profit take €150, so ad spend can be at most €250. That is a ROAS of 4 and a POAS of 400 ÷ 250 = 1.6, which matches 0.40 ÷ 0.25.

The rule assumes overheads move with revenue. If your fixed costs are a set number of euros, recalculate when your revenue changes. No benchmark average can tell you your overhead share, which is why this guide computes the requirement instead of quoting a typical POAS. For what to expect from ROAS, see what is a good ROAS.

POAS minus 1 is what’s left of every €1 of ad spend before overheads: a POAS of 1.5 keeps €0.50, a POAS of 3.0 keeps €2.00.

A higher ratio can mean less profit

POAS is a ratio, so it shows how efficiently each euro of ad spend turns into profit, not how much profit there is. Smarter Ecommerce makes this point in POAS vs true profit optimisation (Manuel Baudisch, March 2026): steering towards a high POAS target can leave absolute profit unearned, because a high ratio on a small spend can earn less than a modest ratio on a large spend. Their alternative is a wider profit-optimisation method, which this guide doesn’t assess.

In the example below, the lower ratio earns ten times the profit.

POAS is still the right tool for finding products below 1.0 and for comparing products on one basis; read it next to the euros of profit after ad spend, which the break-even ROAS calculator shows as net profit. A high POAS on a tiny spend is an invitation to find more volume, which is why Product Segmentation places products on two axes, ad clicks and return.

When ROAS is enough, and when to switch

ROAS is enough while your products earn similar margins or you don’t have margin data yet. Once margins differ between products, POAS is worth the extra input.

Use ROAS when:

• you sell a narrow range with similar margins, so one break-even ROAS fits every product;
• you have no cost data yet and want to see which products attract clicks and revenue first.

Move to POAS when:

• margins differ across brands, categories or product types;
• shipping, returns or payment fees take a different share of different products;
• you are comparing products, campaigns or asset groups that mix cheap and expensive items.

A typical case is a shop selling accessories and devices in one account, with high margins on the accessories and thin ones on the devices. A single ROAS target treats them alike; a POAS target doesn’t.

Without margins you can still compare each product’s ROAS with its own break-even. The break-even ROAS calculator does that one product at a time, while POAS covers all products with one number.

Getting a margin for every product

You need one extra input compared with ROAS: a margin for each product. Most shops already have cost of goods in the product feed or a spreadsheet. An estimate is enough to start: Google Ads Help gives estimating COGS as 80% of the product price as an example, and Merchant Center Help says COGS shared with Google “is for reporting purposes and does not need to be exact”. Replace estimates as you get real costs.

The margin calculator turns one product’s cost, price, shipping, fees and returns into its margin and contribution margin.

Use prices excl. VAT throughout, as these posts do (the margin calculator has a VAT setting if your prices include it), and check that the conversion values in your ad account use the same basis.

Or let Product Metrics read them for you. Connect your store and it takes the cost price from every order, works out each product’s margin and POAS, and sends every purchase to Google Ads marked new or returning, with its profit. You can then increase priority on the products that bring in new customers, not only the ones that sell.

Start with your best sellers: they take most of the budget, so a wrong margin there costs the most. Write down where each margin came from so someone else can repeat it, and let conversion lag settle before judging a recent week.

What POAS leaves out

POAS leaves out fixed costs, so a POAS slightly above 1.0 can still lose money across the business.

Returns and cancellations shrink the revenue you keep, so count them in the variable costs or use net revenue. Use a margin for each product, because one average hides the differences you are looking for. Conversion lag leaves the latest days incomplete, so review weekly rather than daily.

Nor does POAS settle attribution: it shows what a sale earned against the ad spend you assign to it, and says nothing about which click or channel deserves the credit. Whether the ads caused the sale at all is what an incrementality test measures.

POAS in Performance Max: decisions per product

POAS moves the question from the campaign to the product: which products earn their ad spend, and which only use it up.

A Performance Max campaign working to a ROAS target ignores margin and treats thin-margin and high-margin products alike. Once every product has a POAS, you can group your decisions by where it stands against 1.0:

• Well above 1.0: increase priority, so they get more of the budget.
• Around 1.0: keep them running and watch them.
• Below 1.0: lower priority, or fix the price or costs first.

Product Segmentation applies that grouping to every product at once. It is part of Product Metrics, product-level optimisation software for Google Shopping and Performance Max: its ML places each product in one of six segments by ad clicks and return, and writes the segment to Merchant Center labels your Shopping and Performance Max campaigns can split on.

It starts on ROAS and switches to POAS once margins are connected, showing which of the two is in use, which is the moment product A from the three-product table stops looking like an equal. You approve every label, and what each segment gets is your call. For the wider setup, see Performance Max for ecommerce and how to optimise Google Shopping ads.

Your first number: one product’s POAS

The break-even ROAS calculator gives you the starting number per product, Product Segmentation shows where every product stands without working through them one by one, and how to set a target ROAS from your margin turns the result into a Google Ads setting.

But start with one product: multiply its margin by its current ROAS. If the result is below 1.0, that product is losing money on ads, whatever the account ROAS says.

Sources

• Google’s Help pages below don’t state which other costs, if any, Google Ads’ profit metrics leave out beyond COGS, so this guide claims only what they say.
• The calculator’s POAS and ROI definitions were read from its source: POAS is contribution margin ÷ ad spend and ROI is net profit ÷ ad spend.

Sources:

• Google Ads Help: About conversions with cart data
• Google Ads Help: Set up and test reporting with conversions with cart data
• Google Merchant Center Help: Cost of goods (cogs)
• Smarter Ecommerce: POAS vs true profit optimisation
• Product Metrics: Break-even ROAS calculator