How to calculate POAS
Gross profit from ads = Revenue from ads × Gross margin %
POAS = Gross profit from ads ÷ Ad spend
ROAS = Revenue from ads ÷ Ad spend
Profit after ad spend = Gross profit from ads − Ad spend
The key line: a POAS of 1.0 is break-even. Above 1.0, your ads generated more gross profit than they cost. Below 1.0, you paid more for the ads than the profit they produced.
Worked example
Last month your Shopping campaigns spent $5,000 and generated $20,000 in tracked revenue. Your average gross margin is 40%.
| Metric | Calculation | Result |
|---|
| Gross profit from ads | $20,000 × 40% | $8,000 |
| POAS | $8,000 ÷ $5,000 | 1.6 |
| ROAS | $20,000 ÷ $5,000 | 4.0 (400%) |
| Profit after ad spend | $8,000 − $5,000 | $3,000 |
A 4.0 ROAS sounds strong, and here it is: the POAS of 1.6 confirms the campaign earned $1.60 of gross profit per dollar spent, leaving $3,000 after ad costs. Now imagine the same $20,000 in revenue at a 20% margin. ROAS is still 4.0, but gross profit is $4,000, POAS is 0.8, and you lost $1,000.
ROAS vs POAS vs ROI
These three are often confused:
- ROAS = revenue ÷ ad spend. Easy to track in Google Ads, but ignores product cost.
- POAS = gross profit ÷ ad spend. Accounts for product cost, so it reflects whether ads are profitable at the gross level. Break-even is 1.0.
- ROI = net profit ÷ total investment. Includes costs beyond ads (tools, fees, agency, labor). Use the ROI calculator for that view.
ROAS and POAS convert easily: POAS = ROAS × margin. A 4.0 ROAS at 40% margin equals 1.6 POAS. The break-even ROAS is therefore 1 ÷ margin, which you can find with the break-even ROAS calculator.
What is a good POAS?
Anything above 1.0 is profitable at the gross level, but whether it is "good" depends on what else you need to cover:
- Overhead. Gross profit after ads still has to pay for staff, software and fixed costs. Many stores need a POAS comfortably above 1.0 to be profitable overall.
- Growth vs profit goals. A store prioritizing new customers may accept a POAS near 1.0, or slightly below, on prospecting campaigns because repeat purchases add profit later.
- Returns. If many orders come back, tracked revenue overstates real revenue. Adjust margin or revenue downward to compensate.
A sensible approach is to set a POAS floor per campaign type, for example stricter on branded search and more lenient on campaigns that acquire new customers.
How to improve POAS
- Segment by margin. In Merchant Center, add custom labels for margin tiers and split Shopping or Performance Max campaigns by them. Each tier gets a ROAS target that maps to the same POAS.
- Pass profit as the conversion value. Some advertisers report gross profit instead of revenue as the conversion value, so Smart Bidding optimizes directly for profit.
- Cut spend on low-margin products that sell well but contribute little profit.
- Raise order value with bundles, so each conversion carries more gross profit for the same click cost.
- Clean up wasted spend with negative keywords and product exclusions.