Why POAS corrects ROAS
ROAS compares revenue with spend; POAS compares margin with it. The difference sounds technical, but it changes decisions: two campaigns with the same ROAS can have opposite POAS if they sell products with different margins.
Example: two campaigns each spend €1,000 and generate €4,000 in revenue, a ROAS of 4. The first sells products with a 50% margin and generates €2,000 of gross margin, a POAS of 2. The second sells products with a 20% margin and generates €800, a POAS of 0.8: it is losing money.
The threshold also becomes simpler to read. Above 1, the campaign covers its spend with the margin it generates; below 1, it funds that spend with the margin from other sales. No more recalculating a threshold for every margin rate, as you must with break-even ROAS.
Which margin to count
POAS is only as good as the margin you put into it. The minimal version subtracts the purchase cost of the products. A more faithful version also subtracts shipping costs not passed on to the customer, payment fees, and the cost of returns, which can wipe out the margin of entire categories.
Every version can be defended, provided you keep the same one from one period to the next and write it down in black and white. A POAS whose definition changes along the way can no longer be compared with anything.
Watch out for a common variant that subtracts ad spend from margin before dividing. Its break-even point is then 0, not 1. Mixing the two conventions in the same report leads to wrong conclusions.
Bidding on margin
Platforms do not know your margin: they optimize for the conversion value you send them, usually the order amount. To bid on POAS, you have to send them the margin of each order instead of the revenue.
Target ROAS then becomes a target POAS: a target of 1.2 asks the algorithm to generate €1.20 of margin per euro spent. High-margin products are favored, and the ones that sell a lot without making money stop soaking up the budget.
The price is twofold: margin is sensitive data you would rather not expose, and changing the value you send forces the algorithm to relearn. It is a measurement project before it is a bidding setting.
Frequently asked questions
How do you calculate POAS?
Divide the gross margin generated by the campaign by its ad spend. €1,000 of spend for €1,500 of gross margin gives a POAS of 1.5.
What is a good POAS?
A POAS above 1 covers ad spend with the margin generated, before fixed costs. The right level then depends on what has to remain to pay for overheads and make a profit, and on the value of customers over time.
What is the difference between POAS and ROAS?
ROAS compares revenue with spend, POAS compares margin with it. If every product has the same margin, they tell the same story; as soon as margins vary, only POAS tells you which campaigns make money.
Should you send your margin to Google or Meta?
It is the condition for the algorithm to optimize for margin rather than revenue. Some brands send a value proportional to margin instead, multiplied by a coefficient only they know, and adjust their target accordingly.