Term
POAS (Profit on Ad Spend)
Advertising KPI: ratio of gross profit to ad spend. Margin-aware alternative to ROAS, especially relevant for broad assortments and sale dynamics.
POAS (Profit on Ad Spend) — in more detail
POAS stands for “Profit on Ad Spend” — the ratio of contribution (often gross margin) to ad spend. Formula: profit ÷ ad spend. POAS = 1 is the break-even line: ad spend = margin. POAS addresses the central weakness of classic ROAS, which sends misleading steering signals when products have similar revenue but different margins. Operational implementation almost always uses margin-weighted conversion values: each product carries a profit custom label in the feed, passed as the conversion value into Google Ads. Smart Bidding then effectively optimizes for POAS while nominally still running on tROAS.
Example / In practice
A fashion shop has two €100 SKUs: SKU A (full price, 50 % margin) and SKU B (sale, 10 % margin). Classic ROAS treats both equally; with a POAS setup, bidding releases 5× the bid for SKU A — ad euros flow where they create profit.
Distinction from similar terms
ROAS is revenue-based; POAS is margin-based. Contribution Margin is the underlying profit concept. MER (Marketing Efficiency Ratio) is the cross-channel variant. Value-Based Bidding is the bidding mechanic that makes POAS steering practical.
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CPA (Cost per Acquisition)
Advertising KPI: average cost per conversion. Central efficiency metric for lead gen and performance marketing, and the steering input for tCPA bidding.
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