What Is POAS in Google Ads? Profit on Ad Spend Explained
POAS (Profit on Ad Spend) is the contribution margin generated per pound of Google Ads spend. The formula is contribution before ad spend ÷ ad spend, where contribution starts from net revenue (ex VAT, after discounts and refunds) and deducts COGS on goods kept, shipping and fulfilment, payment fees and return handling. A POAS above 1.0x means the campaign covered its variable costs and left contribution towards overhead; below 1.0x means the ads cost more than the contribution they produced. It is not net profit. POAS replaces ROAS for campaign-level commercial decisions because ROAS ignores every cost below the revenue line.
The definition, in one paragraph
POAS stands for Profit on Ad Spend. It is a campaign-level metric that divides contribution margin by ad spend, where contribution margin is net revenue minus cost-of-goods on the goods customers kept, shipping and fulfilment, payment processing fees and the cost of handling returns. Each cost is deducted once: if discounts and refunds are already netted out of revenue, they are not subtracted again below the line. POAS is a registered trademark of ProfitMetrics; the term has been adopted across the UK ecommerce industry as the standard shorthand for profit-first measurement. JudeLuxe uses the term in this sense throughout.
Looking for an agency that manages Google Ads to POAS? See our POAS agency service.
The formula
The numerator is what finance teams call contribution margin: revenue minus direct variable costs, before overheads. The denominator is the ad spend that drove that revenue. The output is expressed as a multiple - 1.5x POAS means £1.50 of contribution before ad spend per £1 spent on advertising. At 1.0x the advertising exactly paid for itself in variable-cost terms and contributed nothing towards overheads. There is no POAS bid strategy inside Google Ads; you get there by sending a contribution value with the conversion and running Target ROAS against it.
Worked example: where ROAS and POAS diverge
The following is a hypothetical example, not client data. A skincare brand running Performance Max spends £8,000 a month and reports 4.2x ROAS against a 3.5x target. The reported figure uses gross attributed revenue before discounts and refunds, which is where the divergence starts.
To run the same arithmetic on your own figures, use the POAS calculator. It reports POAS, after-ad contribution, break-even ROAS and ROAS on one set of inputs, and it measures contribution, not net profit.
| Line item | Value |
|---|---|
| Ad spend | £8,000 |
| Attributed revenue (gross, ex VAT) | £33,600 |
| Reported ROAS (gross) | 4.20x |
| Discount codes used | −£2,150 |
| Refunded revenue (11% of gross) | −£3,696 |
| Net revenue | £27,754 |
| COGS on goods kept (38% of net) | −£10,547 |
| Shipping & fulfilment (10% of net) | −£2,775 |
| Payment fees (2.4% of net) | −£666 |
| Return handling and write-off | −£500 |
| Contribution before ad spend | £13,266 |
| POAS (13,266 ÷ 8,000) | 1.66x |
| After-ad contribution | £5,266 |
Both figures describe the same month. The 4.2x headline is revenue before discounts and refunds; the 1.66x POAS is contribution before ad spend. After paying for the advertising, £5,266 of contribution is left towards overheads - a very different conversation from "4.2x, comfortably above target". The same arithmetic is worth running by product group, because a blended figure can hide groups that are below break-even.
Every figure above is hypothetical and rounded to the nearest pound; the totals add up using the rounded rows as displayed. Refunded revenue is removed once, on the revenue line, and the COGS of resaleable returned stock is excluded from the cost line, so only the real cost of handling returns - inbound carriage, inspection, restocking and written-off units - is deducted below it.
Why Google Ads reports ROAS by default
Google Ads measures what it can see. It sees clicks, conversions and the revenue value passed into the conversion tag. It does not see your cost-of-goods, your warehouse picking cost, your payment processor's blended rate, or your refund rate by SKU. None of that lives in Google Ads unless you put it there.
This is not a Google failing - it is a data-pipeline question. Brands tracking POAS reliably send a measured contribution value with the conversion, using the tag, an offline conversion import or the Conversions API. Conversion value rules are a separate mechanism that adjusts reported value by conditions such as audience, device or location - useful, but not a way to import per-SKU margin.
When POAS is the wrong metric
POAS belongs at the campaign and SKU level. It is not the right metric for every question:
- Platform diagnostics: in-platform ROAS is usually the quicker read for spotting a bid strategy going wrong. Both metrics carry lag - conversions report after a delay, and returns settle later still - so treat either as a diagnostic signal to investigate rather than a settled commercial answer, and confirm against finance data over a window long enough for refunds to land.
- Business-wide marketing efficiency: use MER (Marketing Efficiency Ratio). POAS is too granular for the cross-channel question.
- Net profitability of the business: use the P&L. POAS does not deduct overheads, salaries or finance costs.
We covered the full mapping in POAS vs MER vs ROAS: Which Metric for Which Decision.
How JudeLuxe applies POAS
POAS sits inside our BOI® (Bid On Intent) framework. Every SKU is assigned one of five commercial jobs - Scale, Profit, Protect, Recovery or Gateway - and the POAS target for that SKU is set by its job, not by a blended campaign average. A Scale SKU may run at 1.2x POAS deliberately because it is feeding a strong LTV cohort. A Profit SKU may need 2.5x POAS to justify shelf space. A Recovery SKU may be capped at break-even while inventory health is restored.
The point is not that POAS replaces every other metric. It is that POAS, applied per SKU and per job, produces commercial decisions that survive a CFO's scrutiny in a way that blended ROAS rarely does.
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