Glossary
What is POAS (Profit on Ad Spend)?
By ElenIQ · Last updated
Formula
POAS = Gross Profit ÷ Ad Spend
- Gross Profit
- — revenue minus COGS, fees, shipping, discounts and returns
- Ad Spend
- — the advertising cost that produced the sales
POAS vs ROAS - revenue is not profit
The two metrics share a denominator and differ only in the numerator, but that single difference changes everything. POAS = profit / ad spend, while ROAS = revenue / ad spend. ROAS counts the top line: it treats a one-pound sale on a 70 percent margin product exactly like a one-pound sale on a 10 percent margin product, even though the second keeps a fraction of the money. POAS strips that revenue back to the profit that actually survives, so it answers the question a finance director cares about - not how much did we sell, but how much did we keep.
| ROAS | POAS | |
|---|---|---|
| What it divides | Revenue ÷ ad spend | Profit ÷ ad spend |
| Accounts for margin, fees & returns? | No | Yes |
| Break-even point | Varies with margin (≈3.3 at 30% margin) | Always 1.0 |
| Best used for | Top-line efficiency | Profit-led scaling decisions |
| Typical relationship | Higher (flatters performance) | Lower (the honest figure) |
A worked example
A campaign reporting a comfortable 4.0 ROAS can look very different once the costs ROAS ignores are taken out. Here is the same campaign measured both ways:
Worked example
- Revenue
- £40,000
- Gross margin 55% → gross profit
- £22,000
- Less shipping & fulfilment
- −£2,000
- Less platform & payment fees
- −£1,500
- Less returns (5% of revenue)
- −£2,000
- Less discounts (5% of revenue)
- −£2,000
- Profit
- £14,500
- Ad spend
- £10,000
The same campaign shows a 4.0 ROAS (£40,000 ÷ £10,000). Once real costs come out, each £1 of spend returns £1.45 of profit - still positive, but a very different story.
What is a good POAS?
There is no universal benchmark - the right target depends on margin, return rates and how aggressively you are chasing growth - but the scale below is a reliable way to read any POAS figure.
Reading a POAS value
- < 1.0Losing money after costs - advertising returns less profit than it spends.
- = 1.0Break-even - each £1 of spend returns exactly £1 of profit.
- 1.0–2.0Profitable; thin at the lower end, healthy nearer 2.0.
- > 2.0Strong - room to scale while marginal efficiency holds.
Why ROAS can hide weak profit
Revenue is gross by nature, and four things sit between it and the money you keep. Margin is the first: low-margin SKUs can post enormous revenue while contributing almost nothing. Fees are the second - payment processing, marketplace commissions and platform charges all skim the top before anything reaches the bottom line. Discounts are the third, and the most deceptive: a promotion can lift ROAS precisely because the price cut drives more units, while that same cut quietly erases the profit behind every order.
Returns are the fourth. A sale that is refunded a fortnight later still counts toward this month’s revenue and ROAS, even though it added nothing - and in categories like apparel the return rate can run well into double digits. Stack these four together and a campaign can show a healthy ROAS while its real contribution is thin or negative. POAS closes that gap by measuring the outcome after margin, fees, discounts and returns, which is why it is far harder to fool than a revenue-based ratio.
Break-even POAS
Break-even POAS is the simplest threshold in the whole framework: it is always 1.0. At a POAS of 1.0 each pound of ad spend returns exactly one pound of profit, so the advertising washes its face and contributes nothing above its own cost. Below 1.0 the campaign is losing money on a contribution basis; above 1.0 it is genuinely adding profit. This is cleaner than the equivalent revenue threshold, because break-even ROAS changes with every product’s margin - a 30 percent margin item breaks even at roughly 3.3 ROAS, a 50 percent item at 2.0 - whereas break-even POAS is one no matter what you sell. That stability is what makes a POAS floor (say 1.5) a good target to optimise toward, giving every channel and product the same comparable hurdle.
Why POAS matters most in ecommerce
Ecommerce is where the ROAS-versus-POAS gap does the most damage, because the three things that bend the two apart all run hot at once. Catalogues mix products with wildly different margins, so revenue is a poor proxy for contribution. Discounting is near-constant - sale events, codes and bundle offers - so a rising ROAS during a promotion can disguise a falling profit. And return rates are material enough to matter in the maths rather than the footnotes.
Optimising a paid budget on ROAS in that environment pushes spend toward whatever drives the most revenue, which is frequently the discounted, low-margin, high-return lines - the exact opposite of what a profit-led plan would choose. POAS realigns the budget with the bottom line. It is the natural companion to a forecasting approach that allocates by marginal return rather than headline revenue.
Work out your POAS
Enter your own figures to see POAS, ROAS, profit after ad spend and margin after media side by side.
POAS
1.45×
ROAS
4×
Profit after ad spend
£4,500
Margin after media
11.3%
ROAS vs POAS — revenue return vs profit return
Break-even POAS is 1.0× — profit exactly covers ad spend.
Low margin — profitable but thin
Want the full tool with exports? Open the POAS calculator.
Related terms
- ROAS - revenue divided by ad spend, the top-line ratio POAS corrects for margin and costs.
- break-even ROAS - the revenue multiple needed to cover costs, which shifts with every product’s margin.
- marginal ROAS - the return on the next pound of spend, the metric that should drive scaling decisions.
- POAS calculator - put your own numbers in and export the result.
Frequently asked questions
What is POAS?
POAS stands for profit on ad spend. It is the gross profit generated for every pound of advertising spend - calculated as profit divided by ad spend rather than revenue divided by ad spend. Where ROAS tells you how much revenue a campaign produced, POAS tells you how much money you actually kept after the cost of goods, fees, discounts and returns are removed.
What is the difference between POAS and ROAS?
ROAS is revenue divided by ad spend; POAS is profit divided by ad spend. ROAS treats a one-pound sale on a 70 percent margin product the same as a one-pound sale on a 10 percent margin product, even though the second keeps far less money. POAS strips revenue back to the profit that survives margin, fees, discounts and returns, so it reflects the commercial result rather than the top line.
What is a good POAS?
A POAS above 1.0 means advertising is profitable after costs, and the higher the better. There is no universal benchmark because it depends on margin, return rates and growth goals, but many ecommerce teams treat 1.3 to 2.0 as a healthy working range and set a POAS floor that every channel and product must clear before budget scales.
What does a POAS of 1.0 mean?
A POAS of 1.0 is break-even on a contribution basis: each pound of ad spend returns exactly one pound of profit, so advertising washes its face but adds nothing above its own cost. Below 1.0 the campaign is losing money even if ROAS still looks healthy; above 1.0 it is genuinely adding profit.
Why should ecommerce track POAS?
Ecommerce catalogues mix products with very different margins, run frequent discounts and carry meaningful return rates, so revenue is a poor proxy for what a campaign earns. A promotion can lift ROAS while the discount quietly erases the profit behind it. Tracking POAS keeps the focus on contribution, so budget flows to the products and channels that actually grow the bottom line rather than the ones that simply move the most revenue.
Can a campaign have good ROAS but poor POAS?
Yes, and it is common. A campaign can post a strong ROAS while selling low-margin products, leaning on heavy discounts, or driving sales that are later returned - all of which inflate revenue without adding profit. The headline ROAS looks healthy, but once margin and costs are deducted the POAS can sit near or below break-even. That is exactly why ROAS alone can hide a weak commercial result.
How does POAS relate to break-even ROAS?
Break-even POAS is always 1.0, no matter what you sell. Break-even ROAS, by contrast, shifts with every product’s margin - roughly 3.3 at a 30 percent margin and 2.0 at a 50 percent margin. POAS is therefore a single, comparable profitability hurdle across a whole catalogue, while break-even ROAS is the revenue floor that hurdle implies for each individual product.
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