Use our Free PROAS Calculator to calculate the profit generated on your Facebook, Instagram, Google or Tiktok Ads.
Why is it important?
PROAS stands for “Profit Return on Advertising Spend,” and it is a metric used to measure the profit generated on your paid advertising campaigns. Other metrics like ROAS don’t tell you the full picture of what campaigns are actually adding to the bottom line of the business. Businesses that take a profit-first approach to marketing using tools like StoreHero know that growth at all costs isn’t always worth it.
How is it calculated?
PROAS is calculated by dividing the net profit generated by the advertising campaign by the cost of the advertising.
The formula is Net Profit of ad or campaign/ Advertising spend = PROAS
PROAS is represented is 1 when net profit equals advertising spend. If PROAS is less than 1, this means your net profit is less than the advertising spend incurred. If PROAS is greater than 1, you’ve generated a profit.
For example, if a product sells for €10 and costs you €6 between your Cost of Goods, Shipping Costs and Transaction Fees as well as Advertising spend of €2, that would leave us with a PROAS of 2 as net profit (€4) is 2x our ad spend.