How to switch from ROAS to POAS and why?

Why is it important to send gross profit data into Google Ads, and switch your tROAS bidding to a tPOAS bidding strategy? Find the answers here

Let’s switch the headline around and start with the “why” you should switch from ROAS to POAS

ROAS doesn't tell the full story. High ROAS in Google Ads can in some cases be unprofitable, while a low ROAS can be wildly profitable in other cases 

The only way to truly know how profitable your campaigns are is to measure POAS (duh) and gross profit down to campaign level in Google Ads. 

But why is that? 

Why profit tracking is the better option in most ecommerce cases

The most common way to show this is by looking at 2 products with different price points and profit margins

If you have a calculated break-even ROAS at 350% and you set your campaigns to hit a tROAS of 400% your campaign will focus on product 1 with lower profit margins 

If you however decide to bid on POAS and set your tROAS (tPOAS in theory) at 100% (everything above a 100% POAS is profitable) product 2 will get prioritized and you’ll generate more profit by selling that product

Product 1 will grow your topline 
Product 2 will grow your bottom line 

It’s important to state that this is a VERY simplified example, but I think you understand the mechanics behind bidding on POAS by now

How do we implement profit tracking?

There are a few tools that do this, but whenever I can I use across all my own clients – I’m a huge fanboy of the system and team behind it, so it is a no-brainer for me 

But switching from bidding for ROAS to bidding on POAS comes with a few guidelines if the implementation has to be successful (which it kinda needs to be) 

What you need when implementing POAS into Google Ads is to steer Smart Bidding in the right direction while it’s re-learning that conv. value is not revenue anymore, but gross profit.

No matter which method I use, I ALWAYS implement profitmetrics, and monitor POAS over the next 100 (preferably more) conversions while still bidding on ROAS to be able to get a better idea of where we land in terms of POAS for when I am going to switch conversion actions.

Switching conversion actions happens in the conversion section

Here are my 2 preferred methods for switching from ROAS to POAS

POAS implementation method 1: 

Important notes: Use this method when you heavily use tROAS and aim to have completed the implementation over the timespan of 7 days. 

  1.  Switch conversion actions from revenue > profit (set revenue conversion tags as secondary and profit conversion actions to primary) and do not touch your tROAS settings the first 24 hours
  2. Monitor CPC - If it begins to decrease = lower tPOAS in small increments (from 450% > 400)
  3. Continue to do this until you have hit your desired tPOAS (if CPC all of a sudden increases, lower your budgets in half, to avoid overspending) 

Remember to do this as fast as possible, and preferably over 7 days

POAS implementation method 2: 

Important note: this can be used if your campaigns already run on non-restricted bidding models such as “maximise conversions” or “maximise conversion value”

If your account has more campaigns running with max. conversions/conv. value, but also have a few campaigns running with tROAS (standard shopping campaigns for example) you need to use a bit of both methods for the standard shopping campaigns to successfully re-learn that it’s profit instead of revenue flowing through them now. 

But this one is really simple and only requires switching conversion actions (set revenue conversion tags as secondary and profit conversion actions to primary) 

I tend to still follow the CPC and if I see any significant increases in CPC I half the budget to make sure.

Hope this little POAS article has given you the tools and a better understanding of how important it is to enrich your Google Ads setup with reeltime gross profit, and enabling you to steer your campaigns based on POAS.

Want to work with us?

Partner with Ecommerce Google Ads Growth Experts!

Apply to work with us! We prioritize working with businesses generating +€20,000+ monthly revenue and wanting to scale, to ensure maximum impact.

For aspiring businesses that generates below €20.000, check out our Google Ads Consulting Program