What is POAS?
POAS (Profit on Ad Spend) measures profit generated for every dollar of ad spend. Unlike ROAS, POAS accounts for costs like COGS, shipping, and processing—so it tracks real margin, not just revenue. Use POAS to decide where to press the gas. When ROAS looks fine but cash is tight, POAS reveals which campaigns and SKUs actually pay the bills.
Understanding POAS
POAS brings margin discipline to performance marketing by asking what profit your ads produce for every dollar spent. It forces teams to account for costs like COGS, shipping, and payment fees that ROAS ignores. Brands use POAS to decide which campaigns to scale, which SKUs to push, and where creative or feed fixes will actually move the bottom line. When catalogs span multiple margin tiers, POAS prevents high‑revenue, low‑margin products from soaking up budget. The outcome is spend that tracks contribution profit instead of vanity revenue.
The key idea is simple but powerful. ROAS can look great while POAS is underwater if COGS or discounts eat margins. Reporting POAS by SKU or product set reveals winners and losers hiding inside blended averages. Creative that clarifies price and value can raise AOV and improve unit margins, lifting POAS. Feed enrichment that improves matching reduces refund‑prone clicks. Over time, POAS‑led decisions compound sustainably.
Why POAS matters
POAS matters because you can’t scale losses, and this metric keeps media decisions tied to unit economics. It aligns marketing with finance so teams optimize for profit, not just revenue. It also clarifies which levers—feed quality, creative templates, targeting—actually move contribution margin.
- Profit focus: Keeps scaling tied to contribution margin, not vanity revenue.
- SKU clarity: Highlights which products and categories are truly profitable to advertise.
- Creative and feed ROI: Shows whether design changes or feed enrichment translate to profit, not just clicks.
- Budget allocation: Prioritizes campaigns, platforms, and audiences that return net profit.
How POAS works
POAS works by measuring profit generated per ad dollar after variable costs, turning blended revenue into actionable unit economics. Start by reporting POAS by SKU or product set, then prune losers and feed more budget to winners. Clean feed data in catalog ads makes SKU‑level outcomes visible so you can identify truly profitable products. Creative templates with price, reviews, and promos raise AOV and improve click quality, which lifts POAS. Prospecting and retargeting often require different POAS targets, so evaluate them separately. Trend POAS over time to confirm that feed and creative improvements translate into sustained profit.
Meta Information
- Primary Keyword: POAS
- Secondary Keywords: Profit on Ad Spend, POAS vs ROAS, profitability metrics
- Target Word Count: 800–1,200 words
- Meta Title: What is POAS? Profit on Ad Spend Explained | Marpipe
- Meta Description: Learn what POAS (Profit on Ad Spend) means, how to calculate it, and how to improve it with product feed quality, creative testing, and catalog ads.
- URL: marpipe.com/ad-glossary/poas
# What is POAS?
POAS (Profit on Ad Spend) measures profit generated for every dollar of ad spend. Unlike ROAS, POAS accounts for costs like COGS, shipping, and processing—so it tracks real margin, not just revenue.
Use POAS to decide where to press the gas. When ROAS looks fine but cash is tight, POAS reveals which campaigns and SKUs actually pay the bills.
Understanding POAS
POAS brings margin discipline to performance marketing by asking what profit your ads produce for every dollar spent. It forces teams to account for costs like COGS, shipping, and payment fees that ROAS ignores. Brands use POAS to decide which campaigns to scale, which SKUs to push, and where creative or feed fixes will actually move the bottom line. When catalogs span multiple margin tiers, POAS prevents high‑revenue, low‑margin products from soaking up budget. The outcome is spend that tracks contribution profit instead of vanity revenue.
The key idea is simple but powerful. ROAS can look great while POAS is underwater if COGS or discounts eat margins. Reporting POAS by SKU or product set reveals winners and losers hiding inside blended averages. Creative that clarifies price and value can raise AOV and improve unit margins, lifting POAS. Feed enrichment that improves matching reduces refund‑prone clicks. Over time, POAS‑led decisions compound sustainably.
Why POAS matters
POAS matters because you can’t scale losses, and this metric keeps media decisions tied to unit economics. It aligns marketing with finance so teams optimize for profit, not just revenue. It also clarifies which levers—feed quality, creative templates, targeting—actually move contribution margin.
- Profit focus: Keeps scaling tied to contribution margin, not vanity revenue.
- SKU clarity: Highlights which products and categories are truly profitable to advertise.
- Creative and feed ROI: Shows whether design changes or feed enrichment translate to profit, not just clicks.
- Budget allocation: Prioritizes campaigns, platforms, and audiences that return net profit.
How POAS works
POAS works by measuring profit generated per ad dollar after variable costs, turning blended revenue into actionable unit economics. Start by reporting POAS by SKU or product set, then prune losers and feed more budget to winners. Clean feed data in catalog ads makes SKU‑level outcomes visible so you can identify truly profitable products. Creative templates with price, reviews, and promos raise AOV and improve click quality, which lifts POAS. Prospecting and retargeting often require different POAS targets, so evaluate them separately. Trend POAS over time to confirm that feed and creative improvements translate into sustained profit.
How to Calculate POAS
Standardize the inputs so teams don’t argue about the math. Keep the definition stable across channels and time periods to make comparisons meaningful.
- Formula: POAS = Profit / Ad Spend
- Example: If you drive $10,000 revenue on $2,000 spend with $6,500 variable costs, Profit = $3,500; POAS = 3,500 / 2,000 = 1.75.
- Benchmarking: Many DTC brands target POAS ≥ 1.2–1.5 at scale; your target should reflect gross margin and fixed cost coverage.
Interpretation:
- POAS > 1 means profitable contribution from ads.
- If POAS trails target, diagnose by SKU, audience, placement, and creative template.
POAS best practices
These habits make POAS actionable instead of academic.
- Track by SKU and product set
- Push granular reporting: winners/losers hide inside blended averages.
- Enrich your product feed
- Complete attributes (price, size, availability, category, brand, reviews) improve intent matching and lift margins.
- Use creative templates that influence margin
- Price clarity, social proof, and sale badges increase qualified clicks and AOV.
- Separate prospecting vs. retargeting POAS
- Targets differ. Prospecting usually needs lower CPAs via better templates and broader placements.
- Cull unprofitable SKUs automatically
- Remove low-POAS SKUs from catalog campaigns; shift spend to high-margin products.
- Align promos with catalog templates
- Scheduled sale overlays ensure ads reflect discounts only when they’re live, protecting POAS.
How to Calculate POAS
Standardize the inputs so teams don’t argue about the math. Keep the definition stable across channels and time periods to make comparisons meaningful.
- Formula: POAS = Profit / Ad Spend
- Example: If you drive $10,000 revenue on $2,000 spend with $6,500 variable costs, Profit = $3,500; POAS = 3,500 / 2,000 = 1.75.
- Benchmarking: Many DTC brands target POAS ≥ 1.2–1.5 at scale; your target should reflect gross margin and fixed cost coverage.
Interpretation:
- POAS > 1 means profitable contribution from ads.
- If POAS trails target, diagnose by SKU, audience, placement, and creative template.
How Marpipe Helps Improve POAS
- The Challenge: Blended ROAS hides margin issues. Missing feed fields and generic creative drive low-quality clicks and returns.
- Marpipe’s Solution: Enrich feeds, auto-generate product-level video and template variations, and identify/remove low-performing SKUs from catalog sets.
- Proof Points: Brands consistently lift contribution margin with sale templates, review overlays, and better feed taxonomy.
- CTA: See Enriched Catalogs and Product-Level Video to improve POAS across channels.
Key Takeaways
- POAS focuses growth on profit, not revenue.
- Enriched feeds and intent-led creative are the fastest levers.
- Manage POAS at the SKU and product set level; prune losers, scale winners.
