POAS vs ROAS: Why You Should Optimize for Profit in 2026

Your Google Ads ROAS is 8. That sounds good. Maybe really good. But what are you actually earning per advertising dollar — after shipping, returns, cost of goods and payment fees are deducted? ROAS has no answer to that, because it was never designed to answer that question.

ROAS (Return on Ad Spend) is the most widely used metric in digital advertising. It is easy to understand, simple to report and sits at the top of almost every agency dashboard. The problem is that it is a proxy for what you actually want to know — and a misleading proxy if your products have variable margins, high return rates or varying shipping costs.

POAS — Profit on Ad Spend — is the answer. It is the metric that actually measures whether your advertising is making money. In this guide we walk through the difference, show concrete examples and explain how to implement POAS tracking for your business.

1. What is ROAS?

ROAS stands for Return on Ad Spend and is the most commonly used metric for measuring the effectiveness of paid advertising. The formula is simple:

ROAS is popular because it is easy to calculate and easy to understand. Google Ads and Meta report it automatically, and most agencies use it as the standard measure of campaign success. A ROAS of 5 means you generate 5 DKK in revenue per advertising kroner — and that sounds reasonable enough.

But here is the problem: Revenue is not profit.

ROAS completely ignores what it costs to produce or purchase what you sell. It disregards shipping, returns, payment fees and all the other variable costs that determine whether you actually make money on a sale. Two campaigns can have exactly the same ROAS — and one can be extremely profitable while the other is costing you money.

This is not a flaw in the ROAS formula. It is a fundamental limitation in what it measures. ROAS is designed to measure revenue, not profitability — and that is a crucial difference, particularly for Google Ads and Facebook Ads in industries with variable product margins.

2. What is POAS?

POAS — Profit on Ad Spend — is the metric that actually answers the question you are asking yourself: what am I earning from my advertising? The formula replaces revenue with gross profit:

Gross profit is calculated as: selling price minus cost of goods (COGS) minus variable costs such as shipping, payment fees and return reserves. It is the amount you actually have left after the order is completed and the goods have been shipped.

POAS has a natural break-even point that ROAS can never give you: POAS = 1 means you are earning exactly what you spend on ads. POAS below 1 — you are losing money on advertising. POAS above 1 — you are profitable. A POAS of 2 means you earn 2 DKK in gross profit for every advertising kroner.

It is this clarity that makes POAS so powerful. You no longer need to guess whether a campaign with ROAS 6 is profitable — because you now know that POAS 1.8 on that same campaign tells the whole story.

3. ROAS vs POAS: The key difference

Let us look at the most concrete example. Here are two campaigns with exactly the same ROAS — but vastly different results:

Both campaigns have an identical ROAS of 20. But Campaign A is 10 times more profitable than Campaign B. Campaign B is only just break-even — even with a ROAS that most people would consider a huge success.

This scenario is not a hypothetical worst case. It happens constantly in e-commerce: you advertise for a product category that hits your ROAS target, but you do not notice that the products selling best have your lowest margin. ROAS hides it. POAS reveals it.

Below is the overall difference between the two metrics:

4. When is ROAS particularly misleading?

ROAS is not always misleading. For a business with uniform product margins and no returns, ROAS actually gives a reasonable picture — because profit and revenue are proportionally linked. But in these five scenarios, ROAS is systematically deceptive:

1. Variable product margins

You sell products with 10% margin and products with 60% margin in the same campaign. ROAS treats them as equal. A single Premium item that sells well boosts your ROAS, while the same campaign sells a similar number of low-margin products that are actually costing you money. The algorithm optimizes for what it is measured on — and if that is ROAS, it chases revenue without discriminating.

2. Seasonal products and sales

During Black Friday and sales you reduce prices — but you still pay the same for cost of goods. Your ROAS might drop slightly, but your gross margin has fallen far more. Campaigns that hit your ROAS target at full price are now potentially loss-making. POAS would show it immediately.

3. High return rate

E-commerce in fashion and electronics can have return rates of 20-40%+. ROAS counts a returned item as a conversion — even after the customer sends it back. You pay for the click, you pay for the shipping costs, and you earn nothing. In categories with high return rates, ROAS is almost useless as a profit metric.

4. High-ticket vs. low-ticket items

A single sale of a high-ticket item at 15,000 DKK can look fantastic in ROAS — but if the margin is 500 DKK, it is a poor result. A low-ticket item at 200 DKK with 80 DKK margin may have a lower ROAS but a far better contribution to your bottom line. ROAS blends them together and gives you a misleading average.

5. Aggressive bidding to hit ROAS targets

The most ironic problem: agencies pushing to hit a ROAS target can actually cost you money. The algorithm optimizes for revenue, lowers bids on low-margin products and bids aggressively on high-ticket items — regardless of whether they are profitable. You hit your ROAS target and lose on the bottom line.

5. How POAS tracking works

The concept behind POAS tracking is simple: instead of sending your revenue to Google Ads and Meta as the conversion value, you send gross profit. The algorithms in Google's Smart Bidding and Meta's value optimization then use your actual profit as the optimization goal.

There are three primary ways to implement POAS tracking:

Server-side tracking is not just a technical detail — it is actually crucial for data quality. Over 40% of traditional browser pixels are blocked by ad blockers and browser privacy settings. Server-side tracking bypasses this entirely, because data is sent directly from your server — and your COGS and margins remain confidential (they are never visible in the user's browser).

You can read much more about the technical setup on our dedicated POAS tracking page, where we walk through implementation on Shopify, WooCommerce and custom systems.

6. Results with POAS

POAS is not a theoretical concept — it is a documented approach with concrete results from businesses that have switched from revenue-based to profit-based optimization.

Here are the concrete results from documented cases:

The interesting thing about the last data point is what it means in practice: a company with 50M DKK in revenue was spending 10% of its advertising budget on products that were losing money — and did not know it, because ROAS cannot show that. Switching to POAS revealed it immediately and freed up budget for the 4% of products that accounted for 90% of profit.

That is the real power of profit-based tracking: not just marginally improving existing campaigns, but revealing hidden winners and losers you would never have discovered with ROAS alone.

7. Is POAS relevant for you?

POAS is not relevant for every business in every situation. Here is an honest assessment of who will benefit most from making the switch:

POAS delivers big gains if you are:

You can wait on POAS if:

You are a brand new webshop with few products and uniform margins. If you sell a narrow range of products with approximately the same margin across all products, POAS and ROAS will produce almost identical optimization results — and the setup complexity is not worth prioritizing over other efforts.

You have fewer than 50 conversions per month. Google and Meta's Smart Bidding algorithms require a minimum number of data points to function optimally. Below 50 conversions per month you are below the threshold, and the algorithm falls back on more conservative bidding strategies regardless of whether you use ROAS or POAS as the signal.

Not sure? Use our ROAS & POAS calculator to calculate your current return and see what the difference actually is for your business. It takes two minutes and requires no setup.