The Profit on Ad Spend formula
At its core: Profit on Ad Spend = Gross Profit ÷ Ad Spend. Express as percentage (180% Profit on Ad Spend) or ratio (1.8× profit on spend). Use the same attribution window as your ad platform for fair comparison.
Calculating gross profit per order
Start with order subtotal after discounts. Subtract product COGS (sum of unit cost × qty). Subtract payment processing fees, packaging, and any shipping cost you subsidize beyond what the customer paid.
Apply refunds proportionally when they post — Profit on Ad Spend for a week should restate if big returns land later.
Attribution and ad spend
Use platform-reported spend for the same date range as orders. For blended accounts, split Profit on Ad Spend by channel (Google, Meta, etc.) before merging — otherwise strong Google Profit on Ad Spend hides weak Meta Profit on Ad Spend.
Step-by-step
Follow these in order — each step builds on the previous one.
- 01
Export ad-attributed orders
Pull orders for your date range with campaign/source from analytics or Profit Bid.
- 02
Compute gross profit per order
Subtract COGS, payment fees, shipping subsidy, and refunds from revenue.
- 03
Sum profit and spend
Total gross profit ÷ total ad spend for the same window and channel.
- 04
Express Profit on Ad Spend
Multiply by 100 for percentage. Compare to your breakeven and target bands.
- 05
Automate ongoing
Connect store + ads in Profit Bid so Profit on Ad Spend updates daily without CSV exports.
Frequently asked questions
Common questions about this topic — tap to read answers.
Should I include fixed costs in Profit on Ad Spend?
Classic Profit on Ad Spend uses gross profit before rent and payroll. Some teams define 'contribution Profit on Ad Spend' with allocated ops — be consistent and document it.
