What is POAS, and how it differs from ROAS
In short
ROAS is revenue divided by ad spend. POAS uses a stated profit measure before ad spend. With a 25% pre-ad contribution margin, ROAS of 4.0 gives POAS of 1.0: the contribution covers advertising, before fixed costs. A gross-profit-based POAS leaves other variable costs uncovered.
What is POAS?
POAS divides profit before advertising by ad spend. Specify the profit definition. A goods-only calculation subtracts cost of goods; a contribution calculation also subtracts the variable costs included in your model.
POAS = pre-ad profit ÷ ad spend
ROAS = attributed revenue ÷ ad spend
A POAS of 1.0 covers ad spend only under the costs already included in its numerator. It does not establish net profitability or prove that the campaign caused the attributed orders.
The arithmetic, on one catalogue
Illustrative example, not client results. All amounts use one currency. The table uses product gross profit, before payment fees, fulfilment, shipping, return costs and fixed costs.
| Campaign | Spend | Revenue | ROAS | Gross margin | Gross profit | POAS |
|---|---|---|---|---|---|---|
| A: resale electronics | 10,000 | 48,000 | 4.8 | 9% | 4,320 | 0.43 |
| B: mixed catalogue | 10,000 | 32,000 | 3.2 | 34% | 10,880 | 1.09 |
| C: own brand | 10,000 | 21,000 | 2.1 | 62% | 13,020 | 1.30 |
The same three campaigns, ranked by profit instead of revenue
A has the highest ROAS and fails to cover ad spend even before the other costs. B leaves 880 and C leaves 3,020 after goods and advertising. Those amounts still have to cover the omitted costs. The example shows that a revenue ranking can differ from a profit ranking; it does not show how often this happens across stores.
What ROAS do I need to break even?
break-even ROAS = 1 ÷ pre-ad contribution margin rate
At a contribution margin of 25%, the threshold is 4.0. At 40%, it is 2.5. These thresholds cover the variable costs in the margin definition and ad spend, before fixed costs and required profit. A threshold calculated from gross margin covers fewer costs.
Use the same revenue basis for margin and ROAS. Mixing revenue including tax with margin excluding tax, or net revenue with a return allowance already deducted elsewhere, produces an inconsistent result.
Where the margin number actually comes from
Use realised revenue after discounts and refunds, with the corresponding goods costs and cost recoveries. Add variable payment, fulfilment, shipping and return-handling costs for a contribution view. Avoid subtracting a return twice.
If actual costs are missing, label estimates and check whether plausible changes would reverse the decision. A category average can support an initial calculation but does not establish the profitability of every product. The contribution-margin guide provides a worked cost breakdown.
What changes in budget allocation
Calculate the threshold for each campaign's order mix: at a 25% contribution margin, break-even ROAS is 4.0; at 40%, 2.5. In the table above, A's ROAS of 4.8 fails to cover ad spend at a 9% gross margin. Review attribution and the uncertainty in estimated costs before reallocating budget.
In the table above, C has a POAS of 1.30 on 10,000 of spend. That is an average: additional budget can return less, because scaling can change auction prices, audiences and product mix. Set a loss limit and observe the result of the added spend rather than extrapolating 1.30.
Ad platforms can receive transaction values and other conversion information when configured to do so. Verify your actual integration. For the product workflow, see Loyalz ad and store reporting.
How to calculate POAS on your own data
- Choose a period, currency, tax basis and attribution model. Allow enough time for the relevant purchases and refunds to arrive.
- Export campaign spend and the orders attributed under that model.
- Calculate pre-ad profit using the chosen cost definition, marking estimates.
- Divide campaign profit by campaign spend; a zero-spend row has no defined POAS.
- Report the result with costs included, unattributed orders and remaining uncertainty.
Keep first-order profitability and later customer value separate. A first-order report is useful for immediate payback; later cohort contribution answers a different question. CAC payback follows that contribution over time, and ad measurement covers reconciliation.
Common questions
Is POAS better than ROAS?
ROAS compares revenue with spend; POAS adds the chosen profit definition. Use both with consistent attribution and a clear cost scope. Neither by itself proves incrementality or the return from increasing the budget.
What is a good POAS?
At 1.0 the profit measure in the numerator equals ad spend. With gross profit, other variable costs remain; with pre-ad contribution, fixed costs and required profit remain. Set the target from those obligations and the uncertainty in the inputs.
Does POAS account for returns and discounts?
Only if your margin input does. Gross margin taken from a price list overstates profit on any catalogue with meaningful returns, discount codes or shipping subsidy. Compute margin from settled order lines after refunds, not from the product's list price.
Can I calculate POAS per ad rather than per campaign?
Yes, if ad-level spend can be joined to order lines under an explicit attribution rule. Coverage and unmatched orders must be reported. A last-click tag may support that join, but does not establish the causal effect of the ad.
See it on your data
On a twenty-minute call we connect one ad account and one month of your orders, and work out the gap between what the platform claims and what your shop took. Profit and POAS stay blank until you enter your margin and costs per order.
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