What is POAS? Understanding Profit on Ad Spend

The Basics of (POAS) Profit on Ad Spend

From ROAS to POAS: The evolution of ad metrics

Return on Ad Spend (ROAS) has long been a key metric for advertisers, measuring revenue generated per dollar spent. While effective in some cases, ROAS often overlooks the critical element of profitability.

This is where Profit on Ad Spend (POAS), a metric that factors in associated costs like product expenses, shipping, and payment fees, provides a clearer picture of true advertising success.

POAS formula: A deeper dive

POAS is calculated using the formula:

This profitability-based approach shifts focus from revenue generation to net gains, ensuring resources are directed toward the most impactful campaigns.

Why choose POAS over ROAS?

Unveiling misleading ROAS metrics

ROAS metrics often treat all products equally, disregarding differences in profit margins. This can lead to over-investment in seemingly high-performing campaigns that may yield little profit or even losses.

Here is an example: we can sell two products with different profitability. ROAS will show that the first product is more effective, while in reality, it will mean loss. On the opposite, the ROAS of the second product look much less interesting but it brings much more profit.

The advantage of POAS

POAS-driven campaigns prioritize high-profit products, steering advertising budgets more effectively. By segmenting products based on profitability, advertisers can channel resources to campaigns with the highest returns while minimizing losses.

Implementing POAS in your campaigns

Step 1: Identify product performance

Analyze key metrics like conversion rate, CTR, and ROAS to determine which products sell well. Consider factors like seasonality and competition to refine your strategy.

Step 2: Calculate per-product profit

Subtract costs—including production, shipping, fees, and ad spend—from revenue to find each product’s true profitability. This helps prioritize high-margin items.

Step 3: Optimize for profit on ad spend (POAS)

Compare ad spend with profit per product to ensure a positive return. Focus on profitable products and adjust bids accordingly for a more effective ad strategy.

Benefits of a POAS strategy

Maximizing ROI with smarter segmentation

A POAS-driven strategy ensures that advertising efforts focus on high-margin products, leading to increased profitability and resource efficiency.

Real-Time performance insights

Using performance tracking and insights, advertisers gain access to real-time data, enabling informed decisions and immediate adjustments to campaign strategies.

Getting started with POAS

Evaluate your current metrics

Begin by analyzing your current ROAS-focused strategies. Identify products or campaigns where profitability may be overlooked.

Leverage Channable Insights

Channable Insights simplifies campaign segmentation using POAS. Products are automatically categorized into labels such as "Stars," "Potentials," "Underperformers," and "Invisibles," based on profitability metrics.

The future of ad metrics

Switching from ROAS to POAS is more than a trend—it's a strategic shift toward smarter, more profitable advertising. By focusing on profitability instead of just revenue, businesses can maximize returns, improve resource allocation, and stay competitive in an increasingly data-driven advertising landscape.

Ready to optimize your campaigns with POAS? Discover how Channable Insights can help you maximize profitability.