Definition
POAS (Profit on Ad Spend) is gross profit before advertising divided by ad spend. Here, gross profit means revenue minus product costs and other variable costs.
Also called: Profit on Ad Spend, Profit ROASFollow the sale through to contribution.
Same revenue. A different contribution margin changes what you can afford to spend.
01Sales value does not tell you how much is left.
POAS and ROAS measure different things
ROAS measures revenue per advertising euro. POAS measures how much remains after variable costs. Both can be useful when their definitions and data are clear.
Campaigns with the same ROAS can have different POAS because margins, shipping costs and returns differ.
Calculate POAS
POAS = gross profit before ads / ad spend.
Example: €100,000 in revenue minus €55,000 in variable costs leaves €45,000. With €30,000 in ad spend, POAS is 1.5. Contribution after advertising is €15,000.
Set the target from the economics
POAS of 1 covers advertising but leaves nothing for fixed costs. The target also needs to account for salaries, rent, technology and required earnings.
Repeat purchases can change customer economics. Assess payback and uncertainty too; an expected future purchase cannot pay today’s bills.
Use consistent data
Define the costs and returns included. Check that values match the correct orders before using them for reporting or bidding.
Gross profit before advertising and contribution after advertising are different figures. Under this definition, ad spend is not deducted from the numerator.
Further documentation
ProfitMetrics — POASFrequently asked questions
Is POAS above 1 enough?
It covers advertising within the chosen calculation. Fixed costs, cash flow and required earnings determine whether that level is sufficient.
Is POAS the same as net profit?
No. POAS is a ratio before fixed costs and tax. Net profit requires the full income and cost statement.
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