Every product in your shop has its own break-even ROAS.
Most advertisers use one ROAS target for the whole account. But your margins aren’t the same across products.
Take four products, all at a ROAS of 4.0:
Product A, 10% margin: needs a ROAS of 10.0 to break even. It loses money.
Product B, 25% margin: needs 4.0. It breaks even.
Product C, 40% margin: needs 2.5. It makes money.
Product D, 60% margin: needs 1.7. It makes a lot of money.
Same ROAS. Four different outcomes.
The formula is simple: break-even ROAS = 1 / margin.
So with one ROAS target, Google spends too much on your low-margin products and holds back on the ones that actually earn money.
POAS fixes this. You give Smart Bidding gross profit instead of revenue. Then break-even is 1.0 for every product. One target for the whole catalogue.
The catch: you need to send profit data to Google Ads. That means cost of goods per product in your conversion value, through a tool or your own setup.
