Many web shops still drive their Google Ads campaigns on ROAS (Return on Ad Spend). That seems logical: the more revenue you see back for every euro of ad budget, the better. But revenue says little if your margin is small. More and more companies are therefore switching to POAS, Profit on Ad Spend, which focuses on profit rather than revenue.
What is POAS?
POAS stands for Profit on Ad Spend: the profit you're left with per dollar you spend on ads. Unlike ROAS, which looks at revenue, POAS focuses on what really matters, the underlying margin.
An example:
- You sell a product for €100 with €70 cost.
- You make €30 profit per order.
- If you spend €15 on advertising costs, your ROAS is 6.7 (€100/€15), but your POAS is 2.0 (€30/€15).
At first glance, ROAS seems fine, but you don't see if you're really making a profit until POAS.
Why POAS is changing Google Ads
Advertising based on sales (ROAS) can be misleading. For example, your top sellers may be high cost (low margin), while products with lower sales may be high profit. With Google POAS, you get an honest picture of your campaigns, based on margin and profit per product.
Benefits of steering on POAS:
- You optimize for profit rather than revenue
- Better understanding of actual product performance
- Better decisions for budget allocation
- Less waste of advertising budget
How does POAS work in Google Ads?
By default, Google Ads does not support POAS. So you have to link your own profit data to your campaigns. You do this by:
- Make margin information by product available in your product feed or e-commerce platform.
- Factor these margins into the conversion data, for example, via a custom conversion action (e.g., with custom tracking via Google Tag Manager or server-side tagging).
- Set POAS goals in your bidding strategies (manually or with scripts/automation).
At EasyAds, we help you connect product data, margins and campaigns so you can advertise profitably without complex technical modifications.
The new steering number for e-commerce growth
Switching to POAS requires a different way of thinking. You no longer look at which campaigns generate the most revenue, but which ones really contribute to your bottom line. Especially with large product feeds or small margins, this makes a world of difference.
For many advertisers, it takes some switching, but once you work with POAS in Google Ads, you won't want to go back. It is the logical next step for those who want to optimize their ad budget.
Want to learn more about POAS, margins and Google Ads?
EasyAds helps you with smart connections, feed optimization and profit-oriented advertising on Google, Bol, Amazon and more.
Contact us for a free strategy consultation.