Why ROAS is a broken standard for E-commerce

It’s not that ROAS (Return on Ad Spend) is inherently wrong, but the "return" in ROAS was always meant to be profit. In e-commerce, profit data wasn’t historically available in ad platforms. 

“Return” was eventually replaced by the most accessible substitute: Revenue.

To estimate profitability, marketers often apply an average margin to their revenue. This is where the problem starts: no e-commerce business has the same margin across every product and order combination. By relying on revenue alone, ROAS ignores critical variables:

• Discounts: Promotions that erode your margins are often invisible to revenue-based tracking.
• Cost of Goods Sold (COGS): The landed cost of the product.
• Shipping: Costs paid to carriers to deliver orders to customers.
• Packaging & Handling: Costs associated with preparing orders for shipment, including packaging materials like boxes, tape, and labels.
• Payment Fees: Transaction costs for credit cards or PayPal, often 1-3% of revenue.

The power of 1: why POAS is the ultimate scaling tool

The beauty of switching to POAS® is that it removes the guesswork. In a ROAS world, your break-even point is a moving target. It might be 4.0 for one product and 10.0 for another.

With POAS, your break-even point is always 1.

• POAS > 1: You’re making money.
• POAS < 1: You’re losing money.

It’s that simple. If your POAS is 2.2, you made €2.20 in Gross Profit for every €1 you spent on ads. You finally know which campaigns are building your business and which ones are just burning budget.

Ready to see how this compares to your current reporting? Read our [ROAS vs. POAS Comparison Guide].

The POAS formula: how to calculate profit on ad spend

To calculate POAS®, you divide the Gross Profit from the marketing channel by the ad spend.

• Gross Profit: The amount you made after accounting for variable order costs like COGS, shipping, payment fees, and packaging. It does not count fixed expenses like rent or salaries.
• Ad Spend: The total amount spent advertising the specific product, campaign, or channel.

In practice, POAS gives marketers something revenue-based metrics can’t: clarity.

Instead of estimating profitability with average margins, you can see exactly how advertising spend translates into real profit. That makes it easier to scale campaigns confidently, cut waste faster, and align marketing decisions with the financial goals of the business.