ROAS vs POAS: What Metric Truly Matters in Google Shopping Ads?
- Flomaticx
- Jun 1
- 3 min read
Why This Debate Matters for E-commerce Growth
If you’re running Google Shopping Ads, you’ve likely obsessed over Return on Ad Spend (ROAS). It’s the go-to metric for many advertisers. But here’s the catch: ROAS can be dangerously misleading if you’re not factoring in product margins and real costs. That’s where POAS—Profit on Ad Spend—comes in.
In today’s competitive e-commerce landscape, knowing whether to optimize for ROAS or POAS can mean the difference between scaling profitably or bleeding cash behind seemingly “successful” campaigns. This blog will break down the differences, show you how to calculate both, and explain which one truly matters for e-commerce success.
What Is ROAS in Google Shopping Ads?
ROAS (Return on Ad Spend) = Revenue / Ad Spend
It tells you how much revenue you’re generating for every dollar spent. For example, if you spend $1,000 on Shopping Ads and make $5,000 in sales, your ROAS is 5.0.
Sounds great, right?
Not necessarily.
ROAS doesn’t account for:
Cost of goods sold (COGS)
Shipping costs
Payment fees
Returns and refunds
Operating margins
That means a campaign with a high ROAS could still be unprofitable.
What Is POAS?
POAS (Profit on Ad Spend) = Profit / Ad Spend
Instead of just looking at revenue, POAS zooms in on actual profit. For instance, if your $5,000 in revenue had $3,000 in product and operational costs, your profit is $2,000. With $1,000 in ad spend, your POAS is 2.0.
POAS tells you what you really earned, not just how much you sold.
Why POAS Is Better for Google Shopping Ads
1. Product Margin Differences
Not all products are equal. A €100 item with a 10% margin is much less profitable than a €50 item with a 70% margin. POAS helps you prioritize ads for high-margin products.
2. Smarter Bidding Decisions
By using profit-based rules, you avoid spending on products that sell well but offer razor-thin profits.
3. Better Budget Allocation
POAS reveals which campaigns are actually driving profits, not just revenue. This is crucial when scaling Shopping Ads from €1k to €10k+ in monthly ad spend.
4. Enhanced Reporting for Stakeholders
Clients, stakeholders, and decision-makers don’t care about vanity metrics. POAS aligns marketing and finance teams on what really matters—profit.
How to Start Using POAS in Google Shopping
Step 1: Calculate Your Profit per Product
Subtract cost of goods, shipping, and variable fees from your sale price.
Do this at the SKU level for accuracy.
Step 2: Import Profit Data into Google Ads or a Feed Tool
Use custom labels or supplemental feeds to segment high vs. low-profit products.
Feed tools like DataFeedWatch or Channable support profit-based optimization.
Step 3: Optimize Campaigns Based on POAS Targets
Set minimum POAS targets (e.g., 2.5+) instead of ROAS goals.
Consider Smart Bidding strategies if paired with accurate profit data.
Step 4: Track POAS in Your Reporting Tools
Use Looker Studio with profit-calculated metrics.
Export performance by product and blend in profit columns via spreadsheets or APIs.
Conclusion: Want Real Profit? Stop Chasing ROAS and Embrace POAS
If you’re serious about scaling your Google Shopping Ads, it’s time to move beyond ROAS. While it offers a quick snapshot of revenue efficiency, it can mislead your strategy if you’re not careful.
POAS is the future of performance marketing—especially for e-commerce brands that want to scale profitably.
Need help optimizing your Google Shopping campaigns for profit?
