Last updated: March 2026
If you're running Google Ads for an ecommerce store, you've been optimising for ROAS — Return on Ad Spend. It's the default metric. It's what Google reports. It's what every agency dashboard shows.
But here's the uncomfortable truth: ROAS can lie to you. A product with a 6x ROAS might be losing you money. A product with a 2x ROAS might be your most profitable SKU.
The metric that actually tells you the truth is POAS — Profit on Ad Spend.
ROAS vs POAS: What's the Difference?
ROAS measures revenue generated per dollar of ad spend:
ROAS = Revenue ÷ Ad Spend
A 5x ROAS means every $1 you spend returns $5 in revenue. Sounds great. But revenue isn't profit.
POAS measures gross profit generated per dollar of ad spend:
POAS = Gross Profit ÷ Ad Spend
A 2x POAS means every $1 you spend returns $2 in gross profit. That's a real number your business keeps.
Why ROAS Is Misleading
Consider two products, both getting $1,000 in ad spend:
| Product | Ad Spend | Revenue | ROAS | Margin | Gross Profit | POAS |
|---|---|---|---|---|---|---|
| Decorative Cushion | $1,000 | $8,000 | 8x | 12% | $960 | 0.96x |
| Sofa — 3 Seater | $1,000 | $4,000 | 4x | 55% | $2,200 | 2.2x |
The cushion looks like the winner on ROAS. But after cost of goods, you're actually losing money on it — you spent $1,000 in ads to generate $960 in gross profit. The sofa, despite half the ROAS, generates more than double the actual profit.
If you're optimising for ROAS, you're likely scaling your worst products and starving your best ones.
This is extremely common in home furnishings, fashion, and health/beauty — categories where margins vary wildly across the catalogue.
The Margin Problem in Google Shopping
Google's PMax algorithm doesn't know your margins. It optimises for whatever conversion value you tell it to — which is typically revenue. So it will happily pour budget into high-revenue, low-margin products because they "look" like winners from Google's perspective.
The result:
- High-margin products get less budget because their revenue looks smaller
- Low-margin products get scaled because their revenue looks larger
- Your ROAS goes up. Your actual profit stays flat or declines.
This is why some stores see strong ROAS growth quarter on quarter while their profitability doesn't move.
How to Calculate POAS
You need two things:
- Ad spend — from Google Ads
- Gross profit — revenue minus cost of goods sold (COGS) for each product
Gross Profit = Revenue − COGS POAS = Gross Profit ÷ Ad Spend
A POAS above 1.0 means you're generating more gross profit than you're spending on ads. You're in the black.
What's a good POAS target?
It depends on your overhead structure, but a useful starting point:
- POAS < 1.0 — You're losing money on ad spend after product cost
- POAS 1.0–2.0 — Marginal. Probably not covering all operating costs.
- POAS 2.0–4.0 — Healthy territory for most ecommerce businesses
- POAS > 4.0 — Strong. Scaling aggressively makes sense.
POAS Mode in DukesMatrix
DukesMatrix supports POAS mode natively. Instead of optimising campaigns and budget allocation based on revenue ROAS, it factors in your product-level margin data to calculate true POAS per SKU.
In POAS mode:
- Products are scored using gross profit signals, not just revenue
- High-margin products get elevated scores even if their ROAS looks modest
- Low-margin products get suppressed even if their ROAS looks strong
- Budget recommendations reflect actual profitability, not revenue proxies
The result: Google's algorithm gets the correct signal. Your best-margin products get the spend they deserve. Your catalogue earns more for every dollar of budget.
Getting Your Margin Data Into DukesMatrix
You can pass margin data to DukesMatrix in two ways:
Shopify integration — If you have cost of goods entered in Shopify, DukesMatrix pulls this automatically and calculates margin per product.
Manual margin bands — If you don't have COGS at product level, you can define margin bands by product category (e.g. sofas = 55% margin, cushions = 12% margin) and DukesMatrix applies these as a proxy.
Either way, switching to POAS mode takes under 5 minutes and immediately changes how your products are scored and your budget is allocated.
Should Every Ecommerce Store Use POAS?
If your product catalogue has consistent margins (most products cost about the same percentage of revenue to produce), ROAS and POAS will point you in roughly the same direction. The difference isn't material.
But if you have variable margins — which applies to almost every multi-category store — POAS is the right metric. The wider the spread between your highest and lowest margin products, the more important it becomes.
Furniture, fashion, health/beauty, sporting goods, homewares — all categories where a 10% margin product sits next to a 60% margin product. In these catalogues, optimising for ROAS without margin awareness is leaving real money on the table.
Summary
| ROAS | POAS | |
|---|---|---|
| What it measures | Revenue per ad dollar | Gross profit per ad dollar |
| What Google optimises for | Revenue | Revenue (you need to correct this) |
| Tells you if you're profitable | ❌ No | ✅ Yes |
| Works for all margin profiles | ❌ No | ✅ Yes |
| Available in DukesMatrix | ✅ | ✅ POAS Mode |
ROAS is a useful shorthand. POAS is the truth.
If you're ready to switch your campaigns to profit-first optimisation, start a free trial of DukesMatrix or book a demo to see POAS mode in action.