POAS (Profit on Ad Spend)
Also known as: Profit on Ad Spend
Contribution profit generated per dollar of ad spend.
Ecommerce boards increasingly ask 'what did that spend earn us, after unit costs?' — that is POAS. It sits between ROAS and CAC on the metrics hierarchy: closer to the P&L than ROAS, more responsive than CAC, and it moves with your product mix, not just your bid.
Definition
POAS is contribution profit (revenue minus COGS, shipping, payment fees, and other variable costs) divided by ad spend — the profit-native cousin of ROAS.
Why it matters
ROAS can be flat while POAS collapses (heavier product mix, more discounts). POAS is what the P&L actually sees, and it's what modern bid strategies should target.
Formula
POAS = Contribution Profit ÷ Ad Spend
Revenue-heavy campaigns can look great on ROAS but weak on POAS.
How to compute contribution profit
Start from net revenue (after refunds and discounts). Subtract COGS, inbound + outbound shipping, payment processing (roughly 2.9% + $0.30 for most stores), platform fees, and any product-specific fulfilment. The remainder is contribution profit. Divide by ad spend for POAS. Do this at SKU level via custom labels whenever possible.
Bidding to POAS
Feed a per-order profit value into Meta's value-optimization or Google's conversion value adjustments. When you can't compute profit per order in real time, use average contribution margin as a static multiplier — accurate enough to shift bidding away from the discount-heavy SKUs that inflate revenue but drain profit.
$50,000 spend generated $175,000 revenue at 42% contribution margin → POAS = $73,500 ÷ $50,000 = 1.47.
Common mistakes
- ✕Using gross margin instead of contribution margin.
- ✕Ignoring shipping and payment processing costs.
- ✕Reporting POAS at 4-week granularity so you miss cohort drift.
- ✕Optimising ROAS while POAS quietly slides.