What is net margin?
Nicklas Segatz Mortensen · Growth Hacker · Fractional CMO · Meta Ads Nerd · 8 July 2026 · 3 min.
Definition
Net margin is net profit as a percentage of revenue — that is, what's left once both variable and fixed costs, tax and interest are subtracted.
Also called: Net margin, Net Margin, Profit margin, Bottom-line margin
Sådan virker det
Dækningsbidrag er omsætning minus alle variable omkostninger. Det er grundtallet bag POAS, break-even ROAS og CLTV — kender du ikke din dækningsgrad, er al budgivning et gæt.
01From contribution margin to bottom line
Net margin is the end of the staircase: after cost of goods (gross margin), after shipping, fees and returns (contribution margin), and after fixed costs like salaries, rent, software and marketing. It's the number that decides whether there's genuinely money left once everything is paid.
That's exactly why a business can have a great ROAS and a healthy margin and still have a thin net margin — if the fixed costs are heavy, or the marketing budget has grown faster than the contribution margin. Net margin reveals that in a way no channel metric can.
02Why marketing has to be steered toward the bottom line
All our profit-based steering — POAS, MER, contribution margin — exists to tie advertising to exactly this number. When the bidding optimizes toward contribution margin instead of revenue, and scaling is steered by MER, it's the bottom line the machine works for, not a dashboard.
A healthy growth strategy raises revenue without eroding net margin. Buying revenue that looks great on the top line but thins out the bottom line is the classic trap — and the one profit-based steering is built to avoid.
Frequently asked questions
What's the difference between net margin and contribution margin?+
Contribution margin is what's left after variable costs but before fixed ones. Net margin is what's left after everything — salaries, rent, software and tax included. Contribution margin steers bidding; net margin measures whether the whole business makes money.
Can you have a good ROAS and a bad net margin?+
Yes, easily. A great ROAS says nothing about fixed costs. If they're heavy, or the marketing budget has grown faster than the contribution margin, the bottom line can be thin despite strong channel numbers. That's why we steer toward profit, not toward ROAS.
Related terms
Glossary
What is gross margin?
Gross margin is gross profit as a percentage of revenue — that is, revenue minus cost of goods, divided by revenue. Sell for €100 with €40 in cost of goods, and gross margin is 60%.
Read the entry →Glossary
What is contribution margin?
Contribution margin is revenue minus the variable costs (cost of goods, shipping, fees, returns). It's the amount each order contributes toward covering fixed costs and creating profit.
Read the entry →Glossary
What is POAS?
POAS (Profit on Ad Spend) is your gross profit divided by ad spend. Where ROAS measures revenue per ad euro, POAS measures what you actually keep — after cost of goods, shipping and fees.
Read the entry →Glossary
What is MER?
MER (Marketing Efficiency Ratio) is your total revenue divided by your total marketing spend across every channel. It ignores the platforms' own attribution and shows how efficiently the whole marketing machine is working.
Read the entry →
Nicklas Segatz Mortensen
Growth Hacker · Fractional CMO · Meta Ads Nerd at Oaksmond
Growth hacker and fractional CMO with 10+ years' experience and hundreds of millions in managed ad spend behind him. Background from larger Danish and international scale-ups, and from the agency world.
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