POAS vs ROAS: why high ROAS doesn't guarantee profit
- 450% ROAS but 35% loss per sale – high revenue without profit leads to bankruptcy
- POAS measures true profit after all costs – shipping, COGS, returns, and payment fees are included
- Break-even point: POAS = 100% – every euro of ad spend generates one euro of net profit
- Niet geschikt voor wisselende marges – B2B projecten, seizoenspromoties en <50 conversies/maand
- Transition takes 3-4 weeks – volume may drop 20-40% in the first week, then stabilizes
- 70% of SMEs continue to misuse ROAS – or switch too quickly without proper cost tracking
Why this 450% ROAS can destroy your business
💡 Calculation Example: Why ROAS Misleads
You run a webshop. Product price: €100, advertising costs: €30 per sale.
📊 Scenario 1: With normal purchasing (€50 COGS)
€100 revenue
- €50 purchasing (COGS)
- €8 shipping
- €2 payment fees
- €30 advertising costs
= €10 net profit ✅
ROAS: 333% (€100 / €30)
⚠️ Scenario 2: After scaling up (€70 COGS due to worse conditions)
€100 revenue
- €70 purchasing (COGS ↑)
- €8 shipping
- €2 payment fees
- €30 advertising costs
= -€10 loss ❌
ROAS: still 333% (€100 / €30)
Your ROAS dashboard still looks great. Your advertising partner congratulates you on the growth. But every new sale pushes you closer to bankruptcy. This scenario plays out daily for Belgian webshops that blindly rely on ROAS without looking at true profitability.
The solution? Measuring what truly matters for your business results. But before you switch to POAS, you need to understand exactly when it works and when you're better off sticking with ROAS.
“POAS stands for Profit On Ad Spend. While ROAS focuses on revenue, POAS goes a step further by looking at profit. This means you no longer manage based on revenue, but on how much money actually remains after all costs have been accounted for.”
Source: Extendure – What is POAS: why profit is more important than conversions
ROAS vs POAS: The Fundamental Difference Explained
ROAS stands for Return on Ad Spend. It measures how many euros in revenue you generate per euro spent on performance marketing. Formula: revenue divided by advertising costs, multiplied by 100%.
Concrete example: you invest €2,000 in Google Ads campaigns and generate €10,000 in revenue. Your ROAS calculation: (€10,000 / €2,000) × 100% = 500%. This means: every euro of ad investment yields five euros in revenue.
The fundamental problem with ROAS? It systematically ignores all costs incurred after the sale. Product costs, shipping costs, return processing fees, payment fees, packaging materials – all invisible in your ROAS calculation. You can achieve a spectacular 800% ROAS and simultaneously incur structural losses.
POAS stands for Profit on Ad Spend. It measures net profit instead of gross revenue. Formula: (revenue minus all operational costs) divided by advertising costs, multiplied by 100%.
✅ How POAS works: true profitability
Same campaign, but now with POAS calculation:
📊 Complete cost structure
€10,000 revenue
- €4,500 product costs (COGS)
- €800 shipping
- €400 return processing fees
- €200 payment fees
= €4,100 net profit
💰 POAS calculation:
(€4,100 / €2,000 ad spend) × 100% = 205% POAS
→ Every euro of advertising yields €2.05 in net profit.
Your break-even point is at POAS = 100%. Anything below that means you are advertising at a loss. Anything above that generates real profit. In e-commerce optimization projects, we regularly see companies that believe they are profitable based on ROAS, but score below 100% POAS.
When does POAS work optimally for your situation?
POAS delivers the best results under specific circumstances. Not every business model benefits from it. Here are the four situations where POAS is preferred.
Stable and predictable product margins
You sell products with consistent costs. Each sneaker costs €40 to purchase, shipping €6, selling price €89. These margins remain stable month after month. Google's algorithm can then optimally learn which products, audiences, and campaigns remain structurally profitable. This works excellently for Shopify webshops with fixed suppliers.
Generate at least 50 conversions per month
POAS requires data to recognize patterns. Below 50 conversions per month, Google's machine learning lacks sufficient signals. The algorithm keeps guessing instead of learning. With 200+ conversions per month, POAS operates at an optimal level. For new webshops, we recommend first building volume with conversion optimization before activating POAS.
E-commerce with direct sales cycles
Your customers decide and purchase within a single session. They see an ad, click through, and complete a direct purchase. Perfect for POAS. The algorithm receives immediate feedback: this click generated exactly €X net profit. For complex B2B processes with decision periods lasting months, POAS loses its effectiveness.
“Driving for profit requires a fundamentally different mindset than driving for revenue. It means that as an entrepreneur, you no longer aim solely for growth in volume, but for growth in value.”
Source: SFAA – Driving for profit instead of revenue
When should you avoid POAS?
POAS is not a universal miracle solution. In certain scenarios, it can be counterproductive or even cause harm. Recognize these situations and stick with ROAS.
Highly Fluctuating Margins and Promotions
You run monthly varying promotions. This week offers a 30% discount, next month free shipping, followed by buy-one-get-one deals. Your margins constantly fluctuate between 15% and 45%. POAS becomes disoriented because the break-even point continuously shifts. In such cases, stick with ROAS and perform monthly manual profit checks using your financial dashboard.
B2B with Long Sales Cycles
You sell enterprise software to businesses. From the initial ad click to a closed deal, three to six months can pass. Google's conversion attribution window ends after a maximum of 90 days. After day 90, you lose visibility. POAS cannot optimize for deals it cannot track. In this scenario, focus on lead quality metrics and MQL-to-SQL ratios.
Low Conversion Volumes Below Critical Threshold
Fewer than 50 conversions per month? POAS has insufficient data to detect patterns. The algorithm remains permanently in learning mode, finds no reliable signals, and delivers inconsistent results. In such cases, stick with Max Conversions or Target CPA strategies until your volume consistently exceeds 50 conversions per month. We often observe this with start-up companies during performance marketing initiatives.
No Accurate Cost Tracking Infrastructure
You don't know precisely what products truly cost. COGS vary by supplier and order, shipping costs differ by carrier, returns are not systematically accounted for, and packaging costs are missing. In such a scenario, POAS is pointless and even dangerous, as you would be optimizing based on fictitious profit figures. First, fix your data fundamentals and tracking infrastructure before even considering POAS.
“POAS stands for Profit On Ad Spend and goes much further than ROAS. This metric considers the actual profit remaining after all costs have been accounted for.”
Source: Influde – Calculating POAS: POAS vs ROAS
POAS Implementation: Step-by-Step Action Plan
Implementing POAS requires methodical preparation. Rushing the transition will destroy your campaign volume and waste advertising budget. Follow these three phases diligently.
Phase 1: Calculating Profit Margins (Week 1)
Open a detailed spreadsheet. Create columns for: Product SKU, Selling Price, COGS (purchase), Average Shipping Costs, Return Percentage Last Quarter, Payment Processing Fee Percentage, Packaging Material, Net Profit Per Sale. Fill this in meticulously for at least your top 20 best-selling products or product groups.
Calculate the profit margin per product: (Net Profit divided by Selling Price) multiplied by 100%. Practical example: a product sells for €100, net profit after all costs is €35, profit margin = 35%. Repeat this calculation for every significant product or product category. Be pessimistic, not optimistic.
Phase 2: Correctly Setting Conversion Values (Weeks 1-2)
Log in to your Google Ads account. Navigate to Tools & Settings > Measurement > Conversions. Click on your Purchase conversion action. Scroll down to the "Value" section. Select "Use different values for each conversion" instead of a static value.
Open Google Tag Manager. Find your Purchase event configuration. Add a new variable named "profit_value". This variable should dynamically pass your net profit per specific product to Google Ads. Implementation varies by platform: Shopify, WooCommerce, Magento, or custom development.
Test thoroughly before going live. Purchase multiple test products with different margins, and meticulously check if the correct profit values appear in Google Ads conversion reports. One error here will destroy your entire POAS strategy.
Phase 3: Gradually Activating POAS Target (Weeks 3-4)
First, create a complete copy of your existing best-performing campaign. Let the original continue to run as a safety net and backup. Only proceed with the copy.
Change the bid strategy to "Target ROAS" (yes, literally ROAS even though we aim for POAS). Click on "Show advanced options" at the bottom. Explicitly check: "Use profit values instead of revenue for optimization". It will now effectively operate on POAS despite the confusing name 'ROAS Target'.
Start very conservatively. Begin with a POAS Target between 120% and 150%. Allow a minimum of four full weeks to stabilize without any adjustments. After four weeks of stable volume, gradually increase by 10-20% per adjustment. Patience is key here.
“A product might achieve a high ROAS, but once you deduct shipping costs, purchase costs, and other expenses from the gross result, it can ultimately lead to a loss at the bottom line. Meanwhile, another product with a lower ROAS can still generate profit.”
Source: Dtch. Digitals – Driving Profitability with POAS
Avoiding Three Fatal Mistakes in POAS Implementation
We systematically observe these three critical errors recurring in failed POAS implementations. Prevent them through thorough upfront planning.
Overly Aggressive Starting Target Without a Build-Up Phase
You reason: "My net margins are 40%, so I can set the POAS Target directly to 250% for maximum profit." Week one result: your impressions drop dramatically by 70%, clicks plummet by 65%. Google finds almost no one who meets your extreme profit demand. Your campaigns die a silent death.
Correct approach: start conservatively with a POAS Target between 120% and 150%. Allow four weeks for full stabilization without adjustments. Has volume remained stable? Then cautiously increase by 10-20%. Repeat this process gradually. Patience and data will prevail.
Incomplete Cost Tracking and Hidden Costs
You systematically forget return processing costs, customer service hours, packaging materials, marketplace fees (Bol.com, Amazon), and affiliate commissions. Your POAS Target is set at 150%, but your actual operational break-even is at 180%. Your dashboard shows profit. Your financial overview shows a loss.
Correct approach: conduct a full P&L analysis per product category. Document all costs, truly all costs. Double-check everything. Better to be 10% too pessimistic than 2% too optimistic. In e-commerce projects, we see this go wrong too often.
POAS During Seasonal Peaks and Sale Periods
Black Friday is approaching. You offer a 35% site-wide discount, margins plummet to 12%, and ad competition explodes with 400% higher CPCs. Your POAS algorithm blocks almost all ad delivery. You miss the most important sales period of the entire year because you dogmatically cling to POAS.
Correct approach: during seasonal peaks, pragmatically switch to Max Conversions or Maximize Conversion Value. Capture the volume, accept temporarily lower margins. Afterwards, accurately calculate if the total was profitable. Pragmatism beats dogma. Only switch back to POAS for normal periods after the peak.
Discover if POAS Increases Your Profitability
At ClickForest, we first conduct a thorough performance marketing analysis before implementing POAS. We check your complete cost tracking infrastructure, calculate realistic break-even points per product category, and test with carefully designed pilot campaigns.
No mandatory 12-month contracts. No junior teams managing your account. Direct access to senior expertise that has successfully implemented this dozens of times for Belgian SMEs.
Schedule a free strategy call and discover within 30 minutes if POAS can structurally increase your advertising profitability.
🚀 More leads, higher conversion, better ROI
This article gave you insights. Now it's time for action. Whether you want to build a profitable webshop, generate more revenue from performance marketing or SEO, or grow with AI-marketing - we'll help you move forward concretely.
💬 Discuss your challenge directly with Frederiek: Schedule a free strategy session or send us a message
📧 Prefer to email? Send your question to frederiek@clickforest.com or call +32 473 84 66 27
Strategy without action remains theory. Let's take your next step together.
Frequently Asked Questions about POAS vs ROAS
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The answer depends entirely on your specific business model and cost structure. Break-even is always at exactly 100% POAS. Between 120% and 180% POAS is considered healthy for most e-commerce businesses. Below 100% means consistently unprofitable advertising. Above 200% is exceptional and often temporary. Focus primarily on stability and consistency, not the highest possible number. With automated marketing strategies, we often see better stability.
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ROI (Return on Investment) measures your total business profit relative to all combined business investments: personnel, rent, software, inventory, marketing. POAS specifically measures only net profit relative to advertising costs. ROI takes a broad view of the entire company, while POAS sharply focuses on marketing effectiveness. You can achieve a high POAS but have a low ROI if other business costs become too high.
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Technically, it's possible, but Meta's algorithm is significantly less advanced in profit optimization than Google Ads. Meta does not have a native "Use profit values" option like Google does. For Meta Ads: for now, stick with ROAS with manual profit control or invest in external tools like Triple Whale, Hyros, or Northbeam for advanced profit tracking.
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Systematically add up everything: product purchase price from supplier, shipping costs from supplier to end customer, payment gateway fees (Stripe 1.4% + €0.25, PayPal 2.49%), platform subscription fees (Shopify €29-€299/month), return processing costs per item. Many dropshippers completely forget the last two categories. Use a weighted average COGS from the past three months for variable supplier prices.
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No, absolutely not. VAT is a tax pass-through item that you collect from customers and fully remit to the government. Always calculate POAS excluding VAT for accurate profit calculation. This prevents confusion and ensures calculations are fairly comparable between B2B transactions (reverse-charged VAT) and B2C sales (including VAT). Work with net amounts.
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Immediately stop further optimization. It's better to temporarily pause the campaign. Below 100% POAS literally means you are spending more on ads than you are generating in net profit. Every euro you continue to invest destroys business value. Thoroughly analyze why this is happening: incorrect tracking implementation, consistently low margins, an overly aggressive target set, seasonal effects? Resolve the fundamental cause before proceeding.
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In cases of consistently low conversion volumes (under 50 per month), long B2B sales cycles (more than 30 days), highly fluctuating margins per period, testing phases with new unproven products, or without accurate real-time cost tracking infrastructure. ROAS also works better for pure awareness campaigns via Display and Video ads. Pragmatically choose what suits your situation, not what theoretically sounds best.
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Yes, a hybrid approach often works excellently. Use POAS for stable campaigns: Shopping campaigns and Brand Search with consistent margins. Simultaneously run Max Conversions for volume-oriented campaigns: Generic Search and Remarketing where your primary goal is reach. This mix balances profit optimization with aggressive growth. Test both strategies in parallel and compare results monthly.
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Expect at least two weeks, usually three to four full weeks. Google's machine learning needs to discover which clicks, keywords, and audiences consistently convert profitably. Volume may temporarily decrease by 20-40% during this learning phase. This is completely normal and expected. Do not panic during weeks one and two. Only assess after four weeks whether POAS consistently works for your account.
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Only with extremely short sales cycles under 14 days AND high conversion volumes above 100 per month. B2B with long quotation processes spanning weeks or months? Absolutely not suitable. Google's conversion tracking works for a maximum of 30 days (or 90 days with a custom model). Focus instead on lead quality metrics, MQL volumes, and SQL conversion ratios rather than profit per click.
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Monthly compare your POAS dashboard in Google Ads with your financial accounting software. Manually calculate: total Google Ads advertising costs versus total net profit from those sales according to your accounting. The ratio should match your reported POAS. If it deviates by more than 15%? Then your profit value tracking is incorrect. This is critical with automated tracking.
Sources and references
POAS implementation and Google Ads technique:
Afix (Netherlands): "ROAS vs POAS: the key to profitable advertising" – https://www.afix.nl/roas-vs-poas-de-sleutel-tot-winstgevend-adverteren/
Kick-Off Digital (Netherlands): "ROAS vs POAS: maximize profit from your marketing campaigns" – https://www.kickoffdigital.nl/kennis/roas-vs-poas-haal-maximale-winst-uit-je-marketingcampagnes/
Adchieve: "Google Ads: why choose POAS target over ROAS" – https://www.adchieve.com/en/blog/why-choose-poas-target-over-roas/
Digitong (Belgium): "What is POAS in Smart Shopping campaigns?" – https://digitong.be/blog/wat-is-poas-profit-on-ad-spend/
E-commerce profitability and Belgian context:
boostU (Belgium): "ROAS vs POAS: what you need to know?" – https://boostu.be/roas-vs-poas-wat-moet-je-weten/
Us (Belgium): "Why POAS beats ROAS: the smarter way to measure shopping campaign success" – https://about-us.be/why-poas-beats-roas-the-smarter-way-to-measure-shopping-campaign-success/
Technical tracking and optimization:
JENTIS: "POAS vs ROAS: the key to profitability in e‑commerce" – https://www.jentis.com/blog/poas-vs-roas
