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Gross profit

Gross profit is the money left from a store's sales once the cost of the goods sold is taken out, before delivery, payment fees and advertising.

How it works

Gross profit is revenue minus the cost of goods sold, as an amount of money. Delivery, payment fees and advertising are still to be paid: they and all the store’s other costs come out of gross profit. Divide it by ad spend and you get POAS.

Google Ads reports gross profit when the store sends conversions with cart data and keeps each product’s cost in Merchant Center. Cart data lists the items in each order, and Google matches the items sold with their costs. Our guide to profit-based bidding in Google Ads covers the next step: bidding on profit.

Formula

Revenue − cost of goods sold

Where you see it

  • Google Ads: gross profit and gross profit margin among the cart data metrics, by campaign and by items sold, once cart data and the cost_of_goods_sold attribute are both in place. Our guide to cart data and COGS in Google Ads covers the setup.

Example

Example store, not client data.

The tableware shop sold goods for 180,000 through its ads in a month, and those goods cost it 117,000. Gross profit = 180,000 − 117,000 = 63,000, or 35% of revenue. The ads cost 40,000, which leaves 23,000 for delivery, fees and all other costs.

Not to be confused with

  • Margin — the same result as a share of revenue: 63,000 out of 180,000 is a 35% margin.
  • Contribution margin — what is left once delivery, payment fees and other per-order costs are also taken out, so it is never larger than gross profit.

Right and wrong readings

  • Wrong: “Gross profit in the Google Ads report is what the ads earned.” Right: the report shows gross profit before ad spend. In the example, 63,000 of gross profit leaves 23,000 after 40,000 of spend.
  • Wrong: “Google Ads counts gross profit on every item sold.” Right: it counts only items that have a cost value. In Google’s own example, an order holds a $10 hat with a cost of $3 and a $20 shirt with no cost. The order shows $7 of gross profit, from the hat alone.

Sources