ROAS Is Vanity, Profit Is Sanity: Why Paid Media Must Align With the Bottom Line
TL;DR (For performance marketers, media buyers, and e-commerce founders who are scaling paid ads)
If you’re responsible for growing a business with paid ads and want to avoid the trap of chasing revenue at the expense of profit, this story will show you why traditional ROAS targets can be misleading, and how shifting your focus to profit-based metrics like POAS and contribution margin can protect your bottom line and drive sustainable growth.
For a long time, performance marketing focused on one main metric: ROAS. If revenue divided by ad spend met the goal, budgets went up. If not, spending was reduced. This approach seemed logical, but in reality, it often hurt businesses.
During a recent Foxwell Founders webinar, I spoke with Frederik Boysen, Founder and CEO of ProfitMetrics. He shared an honest story about how focusing on ROAS almost ruined his fast-growing e-commerce business, and explained why profit (not revenue) should be the main focus for today’s ad measurement..
The Cost of Optimizing the Wrong Metric
Frederik’s story starts in 2015, when he was running one of Denmark’s fastest growing e-commerce brands. Spend on Google and Facebook was increasing every month. ROAS targets were being hit consistently. Revenue was climbing. But then, months later, the P&L finally.
Even though the business looked successful based on platform metrics, it was actually losing money. The problem wasn’t fraud or poor management. It was how results were measured. ROAS hid the fact that profit margins changed as new products were added, discounts grew, and order types shifted. High revenue didn’t always mean high profit.
By the time spend was pulled back, the cash flow damage was done. The company went bankrupt.
That experience reshaped his entire philosophy on performance marketing: if you optimize for revenue, you can scale yourself into failure.
Why ROAS Breaks at Scale
ROAS isn’t completely wrong, but it doesn’t tell the whole story.
In a real e-commerce business:
Products have wildly different margins
Customers don’t buy in isolation
Discounts, shipping, payment fees, returns, and handling vary by order
But ROAS treats every dollar of revenue the same way. Two orders with the same revenue can have very different profits, but ad platforms and most marketers treat them as equal.
As a result, teams set cautious ROAS targets to try to stay safe, which:
Caps profitable scale
Hides unprofitable spend
Leaves significant volume on the table
Or even worse, they keep increasing spend on high-revenue but low-margin traffic until the business’s finances fall apart.
From ROAS to POAS: Profit on Ad Spend
Frederik’s solution was deceptively simple: send profit, instead of revenue, back to ad platforms.
This idea led to POAS (Profit on Ad Spend), a metric that shows how much real profit is made for every advertising dollar after:
Cost of goods
Shipping and handling
Payment fees
Discounts and promotions
Returns
With POAS, a break-even point is always 1.0. If you spend $10,000 and make $10,000 in profit, you break even. Anything above that means you’re creating real value.
This approach is powerful because it matches marketing goals with how businesses really work. If you want fast growth, you can aim for a lower POAS as long as your contribution margin goes up. If you need to protect cash flow, you can set a higher target and lower your risk, without having to guess.
Still optimizing for ROAS alone? The smartest advertisers are already thinking about profit, contribution margin, and incrementality. Join Foxwell Founders to learn how they're making better decisions and scaling with greater confidence.
Seeing What Revenue Hides
When marketers shift from revenue to profit, two things happen almost immediately:
Unprofitable spend becomes obvious.
Frederik pointed out that many accounts find 10 to 20 percent of their spend looks good on ROAS but is actually losing money. Turning off this spend might lower revenue in the short term, but it helps the business right away.New scale opportunities appear.
Many campaigns don’t need to have high ROAS targets. Lower-margin products might need more caution, but high-margin or bundled orders can grow much faster than revenue-based bidding would suggest.
In practice, teams don’t usually spend less overall. Instead, they shift their budgets to what actually increases profit.
Contribution Margin as the True North Star
While POAS helps improve media optimization, Frederik stressed that contribution margin is the most important metric for executives.
Contribution margin, which is revenue minus all variable costs, shows how much cash is left to cover fixed costs and make a profit. It’s the one metric that:
Marketing can influence
Operations can improve
Procurement can negotiate
Product and CRO teams can expand
If contribution margin goes up, the business is in good shape. If it goes down, no channel-level metric can fix the problem.
This also solves a common problem in attribution debates. Platforms may argue over credit, but contribution margin only counts each order once. It becomes the main control number, the one truth the business can rely on.
Profit, Incrementality, and Reality
Incrementality testing is still the best way to measure cause and effect, but Frederik made an important point: it should be measured in profit, not revenue.
Extra revenue from discounts or low-margin products can still hurt the business. Incremental profit shows if advertising is really creating value or just moving demand forward at a cost.
The same logic applies to new customer acquisition. Platform-reported “new customers” are often wrong. Backend, first-party data is the only reliable source for understanding whether growth is real and sustainable.
The Bigger Shift
The main lesson from the webinar is more than just changing your KPI. It’s about changing how you think.
Transparency changes how people act. When teams know in real time whether the business is making money, they become more confident, not more cautious. They grow when it makes sense, pull back when it doesn’t, and stop guessing between monthly P&Ls.
ROAS may be an easier metric to report. But profit is a business reality.
Want more insights like this? Join our free newsletter for practical lessons on attribution, profitability, measurement, and the strategies top marketers are using to scale smarter.
