What is PROAS?

What is PROAS (Profit on Ad Spend)?

Definition

PROAS stands for Profit on Ad Spend, specifically Gross Profit Derived from Advertising Spend ÷ Total (Blended) Advertising Spend.

Formula:
PROAS = Gross Profit from Advertising / Total Ad Spend

For example, if you spend $5,000 on ads and generate $15,000 in sales with a 50% margin, your gross profit is $7,500.
PROAS = $7,500 ÷ $5,000 = 1.5

This means you earned $1.50 in gross profit for every $1 of ad spend.

Why PROAS Matters

Unlike ROAS, which only considers revenue, PROAS accounts for cost of goods sold (COGS) — giving a much clearer picture of how much actual profit your advertising is generating.

This makes PROAS a powerful metric for commercial decision-making across performance marketing, pricing, inventory planning, and supplier negotiations.

Use Cases for PROAS

1. Budget Optimisation

Use PROAS to find out which campaigns are generating the highest gross profit, not just revenue. This allows smarter budget allocation toward profitable growth, especially for lower-margin products.

Example: A Meta campaign with a 4.0 ROAS might only deliver a 1.2 PROAS if COGS are high — whereas a Google campaign with 2.5 ROAS and better margins might deliver a 1.8 PROAS.

2. Pricing Strategy

Use PROAS to fine-tune pricing strategies. If a product has strong ROAS but low PROAS, consider price increases or margin improvements to boost profitability.

3. Commercial Strategy

PROAS can inform negotiations with suppliers and manufacturers. If certain products consistently underperform on PROAS, it may be time to renegotiate COGS or reassess product viability.

4. Creative Performance

Test creatives not just by ROAS, but by PROAS. The goal is not just to drive sales, but profitable ones. Use PROAS to guide investment into high-performing creative themes or formats.

How PROAS Differs from ROAS

In short:

• ROAS = "Did we generate sales?"

• PROAS = "Did we generate profit?"

Good PROAS – What’s the Benchmark?

Target PROAS depends heavily on your business model and margin structure, but as a general guide:

• 1.0 PROAS = Break-even on gross profit

• 1.5+ PROAS = Solid performance

• 2.0+ PROAS = High profitability (strong pricing or low COGS)

High-margin brands will often aim for higher PROAS than low-margin ones.

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