ROAS vs. POAS: Which is better for measuring PPC performance?

Return on Ad Spend (ROAS) has long been the go-to metric for measuring PPC performance, but as businesses increasingly focus on profitability over revenue alone, Profit on Ad Spend (POAS) is gaining traction, sparking more debate around ROAS vs POAS as measures of PPC success.

A campaign might generate impressive-looking revenue figures, but that doesn’t necessarily mean it’s making the business money. This is where POAS comes in, offering a more thorough picture of how effectively advertising spend translates into profit.

We analysed ROAS vs. POAS to understand how each metric measures advertising and determine which provides more valuable insights for evaluating the effectiveness and profitability of ad campaigns.

ROAS vs. POAS: What’s the difference?

ROAS measures how much revenue you get back for every £1 spent on ads. POAS measures how much profit you get back for every £1 spent on ads, taking into account the costs associated with making and fulfilling a sale.

So, what are the core differences and which should you be using? Let’s break it down.

Ease of setup, reporting and benchmarking

Winner: ROAS 

ROAS is the clear winner in this category. 

Already built into every ad platform (Google, Meta etc.) with no extra setup, it is extremely easy to use ROAS to start tracking right away. Also, as we already mentioned, ROAS has been the industry standard for years, so it makes it simple to compare across industry benchmarks, channels and campaigns. As the go-to metric, sharing with teams or clients is also more straightforward as everyone already understands it. 

POAS, on the other hand, currently has no native button. You’ll need accurate cost data sent to your ad platforms, often through a tool or custom scripts. It’s also less familiar, so it might need a bit more explaining to stakeholders.

Measuring profitability and optimising campaigns

Winner: POAS

POAS comes out on top here as it’s much better at showing whether ads are actually making money. ROAS ignores profit margins, so even if ROAS looks great on paper and makes an account look healthy, the business itself could still be losing money. POAS is also particularly useful during discount-heavy periods like Black Friday, when reduced selling prices, shipping costs and returns can have a significant impact on profit margins. ROAS might still look healthy, even when the actual profit generated from those sales is considerably lower.

Additionally, POAS allows platforms to optimise bidding towards profitable products, not just popular ones, and makes scaling decisions a bit safer because you know your true break-even point. 

Scaling your business profitably

Winner: It’s a tie

While POAS might initially seem like the better option, ROAS isn’t necessarily bad for scaling; it just depends on whether you’re prioritising revenue growth or profitable growth. The metric you choose to use depends on business goals and product margins. 

ROAS might be the better choice here if you’re more concerned about driving revenue and customer acquisition, whereas POAS should be used when you’re focused on scaling while protecting your profit margins. 

Final thoughts: What comes out on top?

Both ROAS and POAS are incredibly useful tools for measuring PPC performance. 

Smaller brands where every sale earns roughly the same profit might choose to stick with ROAS, as setting up POAS tracking here would mean extra cost and complexity for almost no new insight. A startup spending to build its customer base where getting sales and data is the most important objective might also find ROAS more useful. 

On the other hand, POAS might be the better choice for a retailer with mixed margins or during discount-heavy periods. While not fully built in as a native toggle yet, more digital marketing software platforms have begun building dedicated automated bidding and tracking tools for it, causing it to rapidly rise in the ranks as a more valuable tool for performance tracking.

So, what should you be using to measure performance? Unfortunately, there is no clear-cut winner. 

They’re both perfectly useful, they just measure and tell you different things. In fact, for many ecommerce businesses, the best approach is to use both. Many businesses will use ROAS for quick and straightforward performance reporting, while relying on POAS to make informed decisions about where their advertising budget goes. 

So really, it all boils down to objectives, the type of campaign and what results you want to see. Both have their place, the right choice depends on what you’re trying to achieve.

Looking to make your PPC campaigns more profitable?

At Circus, our PPC specialists help businesses get more from their advertising budgets by focusing on the metrics that matter. From tracking ROAS to optimising for profit, we build and manage campaigns that focus on driving meaningful results. Get in touch to find out how we can help make your PPC campaigns work harder and drive profitable growth.