What is POAS (profit on ad spend)?
How is POAS calculated?
Take the profit on the orders your ads are credited with. Divide it by what you spent on the ads. It is the profit version of ROAS.
A POAS of 1.0 means the profit just paid for the ads. Above 1.0, the ads earned more than they cost on those orders. Below it, they lost money, even with a ROAS that looks fine.
Which profit goes in?
This is the whole question. One vendor defines the gross profit in POAS as revenue minus cost of goods, shipping and fees1. Another uses gross profit without saying which costs come off2. Neither definition names returns or discounts, and a profit figure that keeps them in looks better than the cash reality.
Our convention: use contribution margin before marketing, per attributed order. That is revenue minus the variable costs that grow with every order, returns and discounts included. Always list the costs next to the number.
Does POAS show what the ads caused?
No. POAS still relies on the platform's attribution. It counts the orders the platform credits to ads, including some that would have happened anyway. It is a better view of margin. It is not a measure of what the ads added. For that you need a test.
For ZFD: POAS is useful when the cost data is clean and the credit is checked. Without both, it is ROAS with extra steps.
Worked example
Easily confused with
POAS vs ROAS
Revenue credited to ads over ad spend. It ignores costs.
POAS vs Break-even ROAS
The lowest ROAS at which ads do not lose money: 1 divided by margin. Sources differ on which margin to use.
POAS vs Return-adjusted ROAS
ROAS after accounting for returns. It does not take off the other costs.
POAS vs Profit
POAS covers attributed orders only. It does not cover fixed costs or the rest of the business.
Buzzword alert
"We optimise for POAS, not ROAS."
Usually means: the target changed, but the cost data behind it may not have.
Ask: which costs are inside the profit figure, and where does that data come from?
"Our POAS is healthy."
Usually means: a profit figure with no list of which costs came off.
Ask: is that before or after returns, discounts and fees?
FAQ
Is POAS better than ROAS?
It answers a different question. ROAS says how much revenue ads are credited with. POAS says how much profit, if the costs are right.
What is a good POAS?
Above 1.0 means the ads paid for themselves on attributed orders, on your definition of profit. Beyond that it depends on your margin and cash needs, not on a market benchmark.
Sources
Let’s find what’s actually working.
Next step. Check what your numbers look like on explicit assumptions. Use the Is your ROAS real? calculator.