Profit-Based Bidding in Google Ads: Four Ways Compared

To make Google Ads optimise for profit, change what its bidding sees: the target each group of products must hit, or the value each order reports. There are four ways: margin-tier campaigns with separate Target ROAS; profit as the conversion value; cart data with cost of goods, so Google calculates gross profit; and conversion value rules, which cannot carry product margin. Which one fits depends on how much your margins differ and on conversions per campaign. Before you switch, you need real order values and costs for your top-spending products.

Why does Google Ads bid on revenue, not profit?

Smart Bidding chases the number your store reports with each order, the conversion value. In most stores that number is the order amount. So Maximize conversion value buys as much revenue as the budget allows, and a Target ROAS sets how much revenue each unit of spend must bring back. Neither knows what the goods cost you.

This guide is the map of our profit-bidding articles: each section gives a short answer and links to the full one. The wider maths of margin, order value and break-even sits in our guide to unit economics for online stores. Our guide to bidding strategies for online stores shows how to choose a strategy by conversion volume.

ROAS treats two products the same when they return the same revenue, even if one keeps half the price as margin and the other keeps a fifth. Store owners and agencies we talk to describe this in their own numbers. One owner’s supplier cut the margin to 13%, and advertising the product stopped making sense. An agency told us that a brand at a 30% margin sells well in ads and still ends up at break-even or at a loss.

Example store, not client data.

A tableware store spends 40,000 a month and gets 180,000 in revenue, a ROAS of 4.5. Half of the spend goes to kitchen knives, half to cookware.

On revenue, the two halves look identical. On profit, knives return 2.25 for each unit of spend and cookware 0.9. Cookware’s gross profit of 18,000 does not cover its 20,000 of spend, so it loses 2,000 a month.

Its ROAS of 4.5 sits below its break-even ROAS of 5.0. A strategy that bids on revenue sees knives and cookware as equals.

Gross profit divided by spend is POAS, profit on ad spend. When the value already has every variable cost taken out, POAS breaks even at 1. POAS explained gives the formula and shows when POAS tells you more than ROAS.

What does “profit” mean when you send it to Google?

Google uses one definition in its reports. According to the Google Ads API reference (Metrics), gross profit is revenue from orders attributed to your ads minus the cost of goods sold. Revenue there is the value of the orders minus any discount.

Some practitioners subtract more before they call it profit. In the view of SavvyRevenue’s founder (Margin-Based Campaigns Are Killing Your Profits), the gross profit to send per order is revenue minus discounts, cost of goods, shipping, payment fees and packaging. That is closer to contribution margin. The difference matters for your break-even, and our comparison of contribution margin vs gross margin covers it.

Pick one definition, write it down and use it everywhere: in the value you send and in the target you set. If the value is gross profit only, POAS must stay above 1 to cover shipping and fees. If the value already has them taken out, break-even is exactly 1.

The four ways side by side

1. Margin-tier campaigns

Put each product’s margin band, for example high, mid or low, into a custom label: a feed field that groups products for your campaigns. Then build one campaign per band, each with its own Target ROAS above that band’s break-even. In a store where cookware keeps a 20% margin and knives 50%, cookware would need a target of at least 500% and knives at least 200%.

This is a campaign structure decision, and it has a hard limit: every band divides the same conversions between more campaigns. The portal treats 30 conversions a month per campaign as the minimum and 50 or more as comfortable. It suggests a split only if every part keeps 30 a month.

So your store can carry roughly as many bands as its monthly conversions divided by 30. With 70 conversions a month, that is two bands, not three. The portal’s campaign structure section does this count for each account.

The second limit is the basket. Some buyers buy a different product from the one they clicked on. According to the Google Ads API reference, a purchase with cart data counts as cross-sell when the product bought differs from the product in the ad. Google Ads reports cross-sell gross profit for it.

A low-margin product in its own strict campaign may stop bringing in buyers who go on to buy high-margin products. In the view of SavvyRevenue, an agency, margin tiers starve Smart Bidding of data, and sending profit per order works better. Our article on splitting campaigns by margin shows when the split pays off.

2. Profit as the conversion value

Your site or server calculates profit for each order and sends it in place of the order amount. Bidding then works on profit in every campaign at once, without splitting conversions. For that, your store platform needs the cost of every product at the time of the order, and the order value after discounts.

Two things change the day you switch. First, the ROAS you see in Google Ads becomes POAS, so your old target now measures something else. A revenue target of 450% at a 35% margin equals a profit target of about 158% (4.5 × 0.35 = 1.575). Keep the old number and you ask for almost three times more than before.

Second, revenue leaves the main conversion column. Keep it visible with another purchase action set as secondary. According to the Google Ads API reference (ConversionAction), an action that is not primary is not used for bidding. The exception is a campaign with a custom conversion goal that includes it.

The risk is your own maths. A missing cost or a wrong discount goes straight into what bidding learns from. Our step-by-step guide to sending profit instead of revenue shows the setup.

3. Cart data with cost of goods: Google calculates gross profit

Conversions with cart data add the items of each order to the purchase conversion. According to the Google Ads API reference (CartData), cart data holds the Merchant Center ID, the feed’s country and language, the items and order-level discounts. Add a cost of goods value to each product in Merchant Center, and Google Ads reports revenue, cost of goods, gross profit and margin by campaign.

Three conditions decide whether the numbers are complete:

1. Accounts are linked. Cart data names the Merchant Center account where your products are uploaded, so link that account to your Google Ads account.
2. Item IDs match. The API reference for cart data items (CartData.Item) says each item’s ID must equal the product’s identifier in Merchant Center, the id attribute in your feed.
3. Every product has a cost of goods value. The API reference says gross profit includes only products with a cost of goods value in Merchant Center. In its example, an order has a hat at 10 with a cost of 3 and a shirt at 20 without one. Gross profit is 7, and the shirt is left out.

The Merchant API reference (ProductAttributes) describes the cost of goods sold attribute as used for gross profit reporting. You add it product by product. Our article on sharing cost of goods with Google covers what happens to that data after upload. For the setup, see cart data and gross profit reporting.

Gross profit in reports and bidding on it are two separate things. Industry press describes a separate campaign setting, “Gross profit optimization”, that bids on this gross profit. Search Engine Roundtable (Google Ads Adds Gross Profit Optimization Campaign Setting) reported in October 2024 that it was available in select Google Ads accounts and required cart data and cost of goods. Smarter Ecommerce, a vendor of Google Ads software (Profit Optimization for Smart Bidding), described it in July 2024 for Performance Max and Shopping.

The check that counts is whether the setting appears in your own campaigns. Our article on Google’s gross profit optimization covers what it needs and how to tell if you are ready.

4. Conversion value rules

Conversion value rules change an order’s value based on conditions you set. According to the Google Ads API guide (Conversion value rules), the conditions are:

• audience membership;
• physical location or location of interest;
• device;
• travel itinerary, for accounts on an allowlist.

A rule can use at most two of these. It can multiply the value by 0.5 to 10 or add an amount. Google allows a fixed replacement value only in narrow cases. Rules apply to the whole account or to one campaign.

None of the conditions is a product. A rule cannot say “this product earns 20%”, so it cannot carry margin. Conversion value rules help when profit differs by something a rule can check, such as a region where delivery takes a bigger share of the order. Our article on conversion value rules for online stores covers what they can and cannot adjust.

Which way fits your store?

You can combine the ways. Gross profit reporting runs alongside any of them and leaves bidding as it is. Conversion value rules can sit on top of profit values.

What has to be true before you switch?

1. The order value is real. If every order arrives with the same fixed number, all four ways build on a wrong number. The portal flags a product campaign whose average order value is below 0.30× or above 8× the account’s median order, once it has 10 conversions. Where the value can’t be trusted, the portal hides ROAS and counts by the number of orders and the cost of one order.
2. Each campaign keeps 30 conversions a month after the change. That is the portal’s minimum; 50 is comfortable. A split that leaves a part below 30 trades a sharper target for too little data in each campaign.
3. You have product costs for the products that take most of your spend. In our study of 1.4 million products across 130+ stores over 13 months, the median store spent 68.1% of its budget on its top 10% of products. Get those costs right first. Google’s gross profit leaves out products without a cost of goods value.
4. You have one profit definition and a break-even. Decide what you subtract, then calculate break-even ROAS or POAS per margin band. Start your first target from that and from your account’s actual ROAS, as in setting your first Target ROAS.
5. You have a plan for the target. When the value changes from revenue to profit, convert the target in the same step. After that, change Target ROAS by at most 15% at a time and wait one to two weeks between changes. That is the step the portal’s methodology uses.
6. Revenue stays visible. Keep a secondary purchase action with the order amount, so your reports still show revenue after the switch.

Even on revenue, our data shows no safe point to switch a product off

Profit-based bidding often starts as “cut the low-margin products”. Our data argues for caution even before margin enters the picture. In our study of 1.4 million products, we tested a simple rule on 514,602 products with spend: switch a product off after a set amount spent without a sale.

The accuracy of that decision fell from 88.1% for products with $5 or more of spend to 66.2% for those with $500 or more. And 35.4% of products that had spent the cost of a conversion without a sale converted in later months, with a median wait of 2 months. This is an observation over 13 months, not an experiment.

For low-margin products, that points to a lower share of budget, not zero. A product with a thin margin can still bring the buyer who fills the basket. Our article on low-margin products in Google Ads shows how to choose between excluding, capping and keeping such products.

Our data has a hard limit here: it holds no product costs. Every ROAS we measure is on revenue, not profit. That is why this guide gives decision logic, not profit benchmarks of our own.

The portal’s ROAS is on revenue as well, and the portal does not calculate margin. To find the best-selling products that lose money once costs are counted, use your own numbers, as described in product profitability analysis.

What to do this month

1. Write down margin by category, and by product for the products that take most of your spend.
2. Calculate break-even ROAS for each band: 1 ÷ margin. At a 35% margin that is 2.86.
3. Compare each band’s actual ROAS over the last three months with its break-even. If every band clears it with room to spare, revenue bidding may already be good enough.
4. Count conversions per campaign per month. Split only where every part keeps 30 a month; otherwise, send profit as the conversion value.
5. Check the order value. If every order shows the same number or a test amount, fix tracking first.
6. Add cart data and cost of goods for reporting. It shows gross profit by campaign and leaves bidding as it is.
7. Change one thing, convert the target in the same step, and judge on full weeks after the switch. Values before and after the switch measure different things, so don’t compare them directly.

What your ads are really learning on. The portal checks what stands behind your conversions: whether the real order amount arrives together with the order, or every order carries one and the same number. The portal changes nothing without your consent.

Check your conversions →

Sources

• Google Ads API: Metrics — definitions of revenue, cost of goods sold, gross profit, gross profit margin and cross-sell gross profit; cross-sell is a sold product that differs from the advertised one; gross profit includes only products with a cost of goods value; available only with cart data. Checked 2 October 2026.
• Google Ads API: CartData — Merchant Center ID, feed country and language, items and order-level discounts in cart data. Checked 2 October 2026.
• Google Ads API: CartData.Item — the item ID must be equal to the Merchant Center product identifier. Checked 2 October 2026.
• Merchant API: ProductAttributes — the cost of goods sold attribute is used for gross profit reporting; custom labels group items in a Shopping campaign. Checked 2 October 2026.
• Google Ads API: Conversion value rules — conditions by audience, location, device and travel itinerary; at most two per rule; multiply from 0.5 to 10; account or campaign level. Checked 2 October 2026.
• Google Ads API: ConversionAction — a conversion action that is not primary is not used for bidding, except under a custom conversion goal. Checked 2 October 2026.
• Google Ads Adds Gross Profit Optimization Campaign Setting — Search Engine Roundtable, 14 October 2024: the setting available in select accounts, with cart data and cost of goods required. Checked 2 October 2026.
• Profit Optimization for Smart Bidding – Are you ready? — Smarter Ecommerce (a vendor), 3 July 2024: profit optimisation for Performance Max and Shopping, needs cart data and cost of goods. Checked 2 October 2026.
• Margin-Based Campaigns Are Killing Your Profits (And What to Do Instead) — SavvyRevenue (an agency), Andrew Lolk, 6 November 2025: a practitioner’s view against margin tiers and for sending profit per order. Checked 2 October 2026.
• GetProfit study: 1,404,808 products, 130+ stores, 13 months — switch-off accuracy, products that converted later, share of spend on the top 10% of products.
• GetProfit portal methodology — 30 conversions a month per campaign as the minimum and 50 as comfortable; a split only if every part keeps 30; the order value corridor of 0.30× to 8× of the median order; Target ROAS steps of up to 15%.