Is POAS-Optimized Search Advertising a Short-Sighted Trend?

Profit on Ad Spend (POAS) optimization, based on profit margin, has become increasingly common in search marketing. For many, it appears to be the next step in the evolution of Return on Ad Spend (ROAS).

However, we believe that POAS-driven advertising is only suitable for a select few – for example, resellers with a drop-shipping model. Let us elaborate!

Why do we need more, than just profit margin optimization?

While monitoring advertising profitability is undoubtedly important, focusing solely on profit margin for optimization is short-sighted. True profitability stems from product strategy, pricing, logistics, and cost structure – not just what advertising optimizes.

Marketing's role isn't solely profitability, but growth. No other function within a company focuses on growth in the same way and that's why marketer's need stronger tools to enable growth in an ambitious scale.

We believe, for example, that if you only optimize for profit margin, phones and jackets will remain on the shelves – and you'll end up selling phone cases and socks. This isn't a sustainable way to build a business in the long run.

A Winning Strategy

Instead of fixating on POAS alone, it's more effective to optimize for products critical to the business – by intelligently combining business data with advertising algorithms. This enables you to optimize based on not only profit, but changing stock levels, seasonality, competitor actions, variable availability and so much more.