Let’s dig into what POAS means and why measuring pure sales (ROAS) can hollow out your margins. POAS keeps you honest and thriving.
New to POAS? You’re about to trade in your revenue goggles for profit glasses.
We’re a POAS first PPC Agency. – ROAS looks good. Profit feels good.
Defining POAS (Profit on Ad Spend)
POAS Core definition in plain English
POAS is the profit you earn for every pound/dollar spent on advertising. It’s not just revenue; it’s revenue minus all direct costs, divided by ad spend.
The POAS formula breakdown
- Gross Profit = Revenue – Cost of Goods Sold – Other Variable Costs
- POAS = Gross Profit / Ad Spend
Or, spelt out:
POAS = (Revenue – COGS – Shipping – Fees – Discounts)
/ Ad Cost
Each component must be meticulously tracked to reveal true profitability.
You’ve been told that a 5:1 ROAS is gold. It looks great on a deck, but it hides all the real costs that crush margins.
This article shows why ROAS alone is a dangerous trap for ecommerce leaders and how POAS (Profit on Ad Spend) gives you the whole picture. You’ll learn how to calculate POAS, implement it across teams, and avoid the hidden costs that agencies often ignore. Time to measure profit, not just revenue.
Further reading: POAS: The New Blueprint for Agency Accountability (it’s POAS)
Why ROAS Is Killing Your Margins
The revenue-obsessed trap
ROAS or Return on Ad Spend measures only gross sales per advertising pound. On paper, it’s simple: spend £1, get £5 back, and you’ve got a 5:1 ROAS. But that number ignores the cost of goods, shipping, fees, returns, and promotions. What looks like a winning campaign on a spreadsheet can be bleeding cash behind the scenes fileciteturn1file0.
When marketers chase ROAS, they optimise for revenue, not net profit. That misalignment causes budgets to favour high-volume, low-margin products and pits marketing against finance.
Marketers boast a dazzling ROAS while the CFO sees diminishing net income. Worse, external agencies rewarded on ROAS are incentivised to keep this shiny but misleading metric front and centre fileciteturn1file1.
Real-world example: Profitable ad vs unprofitable ad
Compare two campaigns, each spending £1,000 on ads:
- Campaign A drives £5,000 in sales (5:1 ROAS) but carries £4,500 in COGS and variable costs, leaving just £500 in gross profit – £0.50 profit per ad pound (0.5:1 POAS).
- Campaign B drives £3,000 in sales (3:1 ROAS) with only £1,000 in COGS/variable costs, leaving £2,000 in gross profit – £2 profit per ad pound (2:1 POAS).
A ROAS-only focus would push you to pour more into Campaign A. In reality, Campaign B is four times more profitable.
Why POAS Matters for Ecommerce & C-Suite
Aligning ads with P&L, not just net sales
E-commerce margins are tight. You need to speak CFO. POAS translates marketing performance into profit terms the finance team understands. When marketers and finance share POAS, you collapse silos and align budgets with net income turning marketing from a cost centre into a profit driver
The costs ROAS conveniently skips
ROAS ignores key expenses that erode profit:
- COGS: Raw materials, production labour, inbound freight fileciteturn1file3
- Shipping: Inbound and outbound fulfilment costs
- Payment Processing Fees: Credit-card and gateway charges
- Discounts & Promotions: Coupon codes, bundles, sales
- Returns & Refunds: Return shipping, restocking, and depreciation
- Variable Overheads: Packaging, handling, partial fulfilment labour
- Creative & Management Fees: Per-campaign creative production fileciteturn1file3
These “hidden costs” can add anywhere from 10–70% extra to the actual customer acquisition cost.
Calculating POAS: A Step-by-Step Guide
Gathering your cost inputs
Accurate POAS needs granular data. Pull figures from:
- E-commerce platform (revenue, discounts)
- Accounting system (COGS, tariffs)
- Shipping carriers (inbound/outbound fees)
- Payment processors (transaction fees)
- Fulfilment/warehouse (packing labour, materials) fileciteturn1file11
Accounting for product, shipping, fees, and discounts
Attribute each cost to the exact campaign sale, often via per-unit rates:
- COGS per unit
- Shipping per unit
- Fees per transaction
- Discount value per order
This ensures your POAS ties directly to each pound spent on ads.
Worked example with real numbers
An online store runs a Google Ads campaign for one month:
- Revenue: £10,000 (100 units)
- Ad Spend: £2,000
Cost inputs for 100 units:
- COGS: 100 × £30 = £3,000
- Shipping: 100 × £5 = £500
- Payment fees: 100 × £2 = £200
- Discounts: 100 × £3 = £300
- Gross Profit = £10,000 – £3,000 – £1,000 = £6,000
- POAS = £6,000 / £2,000 = 3:1
By comparison, ROAS = £10,000 / £2,000 = 5:1. POAS exposes that those extra sales aren’t all profit.
Implementing POAS in Your Marketing Workflow
Data infrastructure & tracking tips
Invest in smooth data flows. Automate exports from your e-commerce, accounting, ad platforms, and analytics tools into a BI dashboard. Manual spreadsheets invite errors and delay insights. A unified data warehouse gives you POAS in near real-time.
Our Analytics service can quickly get this done for you.
Reporting POAS to the board
Build a simple dashboard that shows POAS alongside ROAS and total profit contribution.
Highlight campaigns with low POAS to spark corrective action. Tie metrics to P&L line items so the CFO sees exactly how ads move the bottom line.
POAS vs ROAS: A Side-by-Side Comparison
ROAS vs POAS metrics
| Metric | What It Measures | Pros | Cons |
| ROAS | Revenue / Ad Spend | Easy, widely supported | Ignores direct costs; misleads profitability |
| POAS | (Revenue – Costs) / Ad Spend | True profitability; aligns with P&L | Requires granular cost data; more complex |
Common Pitfalls & How to Avoid Them
Missing cost categories
- Forgetting to include returns and restocking fees
- Overlooking platform transaction fees (e.g., Shopify)
- Ignoring inbound logistics (duties, freight)
- Leaving creative and agency fees off the books
Tip: Build a cost checklist and update it quarterly.
Over-optimising for a single channel
Chasing a high-POAS channel can reduce diversification. Keep an eye on emerging platforms and don’t starve other channels. Profit needs balance.
Integrating POAS into bidding
Feed POAS targets into your bidding algorithms. Set ROAS floors and profit goals in your ad platform rules to automatically favour higher-POAS placements.
Quarterly audit checklist
- Review all cost line items and update rates
- Reconcile POAS dashboard vs actual P&L
- Audit attribution windows (are you counting late conversions?)
- Spot-check campaign data for anomalies
- Adjust targets based on seasonal margins
Read our full guide on how to set up POAS on Meta & Google ads here: How to Set Up POAS Tracking in Your Ad Account.
Conclusion: Profit First Wins
Don’t let a shiny ROAS mask your proper financial health. POAS gives you the clarity to allocate ad spend where it counts: your bottom line. Start measuring profit first, optimise continuously, and watch sustainable growth follow. Your CFO will thank you.