POAS Vs ROAS: Which Is Better For Your Ecommerce Growth?

Right, let's settle this once and for all. You've probably heard both POAS and ROAS thrown around in marketing meetings like they're football teams you're meant to support. But here's the thing - one of them is actually useful for growing your ecommerce business, and the other? Well, it's a bit like measuring your fitness by how much you can eat rather than how healthy you actually are.

If you're running Google Ads for your ecommerce brand and wondering which metric deserves your attention (and budget decisions), you're in the right place. Let's break down both metrics without the marketing fluff.

What Is ROAS (Return on Ad Spend)?

ROAS is the older sibling in this family - the metric everyone knows and most people default to. It's simple: for every pound you spend on ads, how much revenue comes back?

The calculation is straightforward: ROAS = Revenue Generated / Ad Spend

So if you spend £1,000 on Google Ads and generate £4,000 in revenue, your ROAS is 4.0 (or 400%). Easy enough to understand, which explains why it's everywhere.

ROAS strengths:

• Quick to calculate and understand

• Great for rapid campaign assessment

• Useful for comparing campaigns at surface level

• Most advertising platforms show it by default

• Perfect for impressing stakeholders who like big numbers

But here's where ROAS gets problematic:

• Completely ignores your costs (COGS, shipping, fees)

• Can make unprofitable campaigns look brilliant

• Doesn't account for product margin differences

• Creates a false sense of campaign success

• Can lead to scaling campaigns that actually lose money

What Is POAS (Profit on Ad Spend)?

POAS is the metric that actually cares about whether you're making money or just moving it around. It measures the gross profit generated from your ad spend after deducting all the costs that matter.

The calculation considers reality: POAS = Gross Profit / Ad Spend

Where Gross Profit = Revenue - COGS - Shipping - Payment Fees - Returns - Discounts

POAS advantages:

• Shows actual profitability, not just revenue vanity metrics

• Accounts for product-specific costs and margins

• Enables smarter budget allocation decisions

• Provides transparency for all stakeholders

• Prevents scaling campaigns that destroy profit margins

• Better for long-term business sustainability

POAS requirements:

• More complex tracking infrastructure

• Accurate cost data across all products

• Integration between advertising and financial systems

• Time investment to set up properly

• Ongoing maintenance of cost data

The Real-World Difference (That Actually Matters)

Let's say you're selling premium headphones and budget phone cases. Your ROAS might look brilliant across both product lines, but here's what POAS reveals:

Premium Headphones:

• Revenue: £200 per unit

• COGS: £80

• Shipping/Fees: £15

• Gross Profit: £105

• If ad cost per sale is £25, POAS = 4.2

Budget Phone Cases:

• Revenue: £15 per unit

• COGS: £12

• Shipping/Fees: £2

• Gross Profit: £1

• If ad cost per sale is £5, POAS = 0.2

Your ROAS might show both campaigns performing well, but POAS reveals that phone case campaigns are actually costing you money with every sale. This is precisely why relying solely on ROAS can quietly drain your profits while showing impressive "performance" metrics.

When ROAS Still Makes Sense

Before we completely write off ROAS, there are scenarios where it remains useful:

Early campaign assessment: When you need quick performance indicators for new campaigns, ROAS provides immediate feedback on revenue generation potential.

Brand awareness campaigns: If your primary goal is exposure rather than immediate profitability, ROAS can measure reach effectiveness.

Promotional periods: During sales events where margins are temporarily compressed, ROAS helps track volume generation.

Comparison benchmarking: For comparing performance against industry standards where POAS data isn't available.

Why POAS Wins for Ecommerce Growth

Here's the uncomfortable truth: sustainable ecommerce growth requires profit, not just revenue. You can't pay your team, invest in inventory, or scale your operations with revenue that gets eaten up by costs.

POAS provides strategic advantages:

• Product-level optimisation: Identify which products actually drive profit, not just sales volume • Budget allocation accuracy: Invest more in genuinely profitable campaigns and products • Margin protection: Avoid the trap of scaling campaigns that look good but destroy profitability • Stakeholder transparency: Finance teams and investors care about profit, not just revenue movement • Long-term sustainability: Build campaigns that contribute to actual business growth

The harsh reality check: Many ecommerce brands discover they've been scaling unprofitable campaigns for months when they finally implement POAS tracking. It's like finding out your "successful" diet has been making you gain weight.

Setting Up POAS Tracking (The Practical Bit)

Getting POAS right requires proper infrastructure, but it's not rocket science:

Essential data points you need:

• Product-specific COGS

• Shipping costs per order

• Payment processing fees

• Return rates and costs

• Discount amounts applied

• Variable fulfillment costs

Integration requirements:

• Connect your ecommerce platform to advertising accounts

• Ensure cost data flows accurately to your reporting tools

• Set up regular data validation processes

• Create automated reporting for ongoing optimisation

Start simple: Begin with average cost percentages if exact product costs aren't immediately available, then refine your data over time.

Making the Switch: ROAS to POAS Migration Strategy

Phase 1: Parallel tracking (Month 1-2) Run both metrics simultaneously to understand the differences in your specific business. This reveals which campaigns have been misleading you.

Phase 2: Decision framework adjustment (Month 2-3) Start making optimisation decisions based on POAS while keeping ROAS for comparison. You'll likely discover some surprising insights about campaign performance.

Phase 3: Full POAS optimisation (Month 3+) Shift budget allocation, bidding strategies, and campaign scaling decisions to POAS-based criteria. This is where sustainable growth begins.

The Bottom Line: Which Should You Choose?

For established ecommerce businesses serious about sustainable growth, POAS wins decisively. It provides the transparency and accuracy needed to make intelligent advertising decisions that actually contribute to your bottom line.

ROAS remains useful for quick assessments and broad comparisons, but relying on it for strategic decisions is like navigating with a compass that points to "revenue north" instead of true north - you'll end up somewhere, but probably not where you intended to go.

The strategic recommendation: Implement POAS tracking as soon as your business infrastructure allows. The initial complexity investment pays dividends in campaign performance and business sustainability.

For immediate action: Start by calculating POAS manually for your top-performing ROAS campaigns. You might be surprised by what you discover about their actual profitability.

The metric you choose ultimately depends on whether you want to optimise for impressive spreadsheet numbers or actual business growth. Choose wisely.

Ready to implement profit-focused advertising strategies that actually grow your ecommerce business? Get in touch and let's discuss how proper measurement can transform your Google Ads performance from revenue generation to sustainable profit growth.