ROAS is everywhere. It’s clean, simple, and gives you something to show in a dashboard. But in e-commerce, simplicity often hides complexity. And ROAS is no exception. If you’ve ever seen a campaign with a sky-high ROAS – and still questioned where the profit went – you’ve already spotted the problem. ROAS tracks revenue. Not margin. Not returns. Not what’s actually left in your bank account after all costs.

That’s why serious e-commerce teams are shifting focus: towards profit-driven e-commerce advertising and metrics like POAS (Profit on Ad Spend). But it’s not merely about replacing one metric with another. It's about using the right insights, at the right time, with the right tools to achieve your specific business goals, be it maximizing profit, scaling growth, or achieving that sweet spot of profitable growth. And crucially, with platforms like Expanly, you no longer have to make a rigid choice.

POAS vs ROAS in E-commerce: What’s the Real Difference?

Let’s break it down simply:

• ROAS (Return on Ad Spend) = Revenue / Ad Spend This tells you how much revenue you generated for each dollar spent on advertising. It’s great for a quick glance at revenue efficiency but dangerously assumes every sale holds equal value to your business, which is rarely true in a diverse product catalog.
  
  
  

• POAS (Profit on Ad Spend) = Profit / Ad Spend This digs much deeper. Instead of just celebrating revenue, POAS asks what your business actually kept after costs. In an environment where product margins can vary wildly across your SKUs – from a lean 5% to a healthy 70% – this distinction is critical.
  
  
  

Now, factor in returns, shipping, handling, payment processing, and other operational overhead. That campaign boasting a 700% ROAS? It might be barely breaking even, or worse, losing money on every "successful" conversion. This is exactly why high ROAS doesn’t mean profit – and why understanding this difference is non-negotiable if you're serious about sustainable scale.

How to Calculate True POAS for Better Insight

To move towards True POAS, you need a more comprehensive calculation. A robust POAS formula looks something like this:

True POAS = (Revenue from Ads – Cost of Goods Sold (COGS) – Value of Returns – Other Variable Transaction Costs – Ad Spend) / Ad Spend

To accurately calculate True POAS, you need to have a firm grip on:

• SKU-level profit margin data (Revenue - COGS).

• Return rates and the monetary value of those returns.

• Any other variable fulfillment or operational costs directly tied to a sale.

• A unified view of ad spend across all relevant platforms and product lines.

Yes, this requires more effort and better data integration than simply pulling a default ROAS report from your ad platform. But the payoff is invaluable: accuracy and a true understanding of profitability. When you start optimizing based on POAS, your campaigns stop merely chasing revenue volume and start strategically building sustainable profit.

Measuring True Ad Performance: Asking the Right Questions

The biggest mistake in paid media? Optimizing for what the ad platform easily reports, rather than what your business actually needs to thrive. To begin measuring true ad performance, you need to ask more incisive questions:

• Which campaigns are generating the most actual profit, not just the highest sales volume?

• Which products or campaigns are attracting high lifetime value (LTV) customers, not just those with high click-through rates (CTRs)?

• Which SKUs genuinely improve your overall contribution margin when their advertising is scaled?

• How does our ad performance align with strategic goals like new market entry or acquiring specific customer segments, even if initial POAS is lower for these initiatives?

ROAS alone cannot answer these questions. POAS gets you significantly closer by focusing on immediate profit. But even POAS might not tell the whole story when broader strategic objectives are in play. So, where does that leave e-commerce businesses striving for both growth and profitability?

You Shouldn’t Have to Choose: Growth OR Profit – The Expanly Approach

This is precisely where a sophisticated platform like Expanly changes the game. With Expanly, you’re not forced into a restrictive binary choice between focusing solely on growth (potentially at the expense of profit) or pure profitability (which might limit scale). You can strategically optimize for both – or dynamically dial up one focus depending on your current business phase, market conditions, or specific campaign objectives.

Expanly allows you to embed your unique business insights directly into your campaign structure. This makes it possible to:

• Push high-margin products when maximizing profitability is the key objective.

• Promote strategic SKUs (like new product launches or items that attract high-LTV customers) even if they are early in their performance lifecycle and don't yet have high ROAS or POAS.

• Intelligently balance campaigns across immediate profit drivers and longer-term growth targets.

• Dynamically adapt campaigns in response to shifts in market demand, competitor actions, or your own inventory and margin fluctuations.

You don’t just passively look at metrics after the fact; you proactively design the operational logic. The ad systems, guided by this enriched data and strategic direction, then follow your lead. This transforms your advertising from a "black box" into a programmable, profit-aware growth engine.

The Expanly Advantage in E-commerce Advertising

Here’s how Expanly empowers you to move beyond simplistic metrics:

• Integrate Real Profit Data: Seamlessly add actual profit data (revenue - COGS - other costs) into your optimization process, giving ad platforms the critical context they lack.

• Flexible Campaign Segmentation: Segment and manage campaigns based on POAS targets, ROAS goals for specific initiatives, or a custom blend tailored to your strategy.

• Automated SKU Prioritization: Implement rules to automatically prioritize or deprioritize SKUs in your campaigns based on your defined profit logic and real-time performance.

• Holistic Financial Awareness: Balance customer acquisition campaigns with retention efforts, always with a clear view of the financial implications and profitability targets.

With Expanly, you make every ad dollar work harder and smarter – whether your immediate goal is maximizing short-term returns or investing in sustainable, long-term growth. You don’t need to abandon ROAS entirely; you just need to place it within the much more important context of actual profit.

Optimize for What Actually Matters: Your Business Strategy

If you’re feeling stuck between the perceived simplicity of ROAS and the deeper insights of POAS, here’s the truth: the specific metric you focus on doesn’t matter nearly as much as the overarching mindset and strategy.

Adopt a mindset that constantly asks:

• Does this campaign truly align with what our business needs to achieve this quarter, this year?

• Does this product deserve more (or less) visibility based on its actual profit contribution, not just its click-through rate?

• Are we scaling advertising for products that are genuinely profitable at scale, or just those that are easy to sell?