How to Read Your Margin Erosion Report

Total conversion value reported by Google Ads over the reporting period. This is the top-line number everyone celebrates. It tells you nothing about profitability.

Gross profit (from Shopping feed COGS data) minus total ad spend. This is what actually hits your bank account. When this number is negative, every sale costs you more than you earn — regardless of what the ROAS says.

True profit after ads as a percentage of gross revenue. This is the real margin — not the gross margin from your P&L, but the margin after Google takes its cut. A 4x ROAS with a 10% gross margin can still produce a negative profit margin after ad costs.

Indicates whether your Shopping feed includes cost_of_goods_sold. If false, the audit uses revenue minus ad spend as a proxy (contribution margin) — accurate for cost structure but missing COGS. Product-level margin analysis requires COGS data in your Merchant Center feed.

You're spending more on advertising than your products cost to produce. Google is a larger expense than your supplier. This is the clearest signal that bids need to be pulled back to protect margin.

Product costs exceed ad costs — a healthy cost structure for most ecommerce businesses. Margin erosion, if present, comes from the ad spend slice growing faster than revenue.

This campaign generates revenue at a strong multiple of ad spend, but the underlying product margins are so thin that ad costs still exceed gross profit. ROAS says 'scale this' — margin says 'you lose money on every sale.'

Spending more than the revenue generated. No illusion needed — this campaign loses money on every metric.

Current ROAS is below the break-even threshold for this category. Every conversion in this category costs more in ad spend than the gross profit it generates. You are paying Google more than you earn from the sale.

ROAS is slightly above break-even — a small CPC increase or conversion rate dip would push this category into loss. There is no margin for error.

Every unit sold costs more to advertise than the gross profit it generates. The algorithm will continue scaling these products because it optimizes for conversion volume, not profitability — it has no visibility into your COGS.

These products deliver both revenue and profit. They are your account's foundation. If any of these lose budget to margin destroyers, the entire account's profitability suffers.

This entire product category loses money after ad costs. Even if individual products within it convert, the category as a whole is a net negative. The problem is structural — margin rates in this category cannot support advertising costs.

These products look great in the dashboard but generate less actual profit than products with lower revenue but better margins. The algorithm will push budget toward these because it sees revenue, not margin.

This campaign's ad spend exceeds its revenue. Without even accounting for COGS, the campaign is unprofitable. With COGS factored in, the loss is even worse.

More than a fifth of your total budget goes to campaigns that return less than half their cost. This isn't a few bad keywords — it's a structural allocation problem where the algorithm funnels significant budget to loss-making campaigns.

This campaign generates significantly more return per dollar than the account average. Budget moved here from CUT campaigns improves overall profitability without increasing total spend.

This campaign drags the account average down. Budget here earns 30%+ less than it would in a SCALE campaign. Reallocating is a zero-cost profitability improvement.

If this campaign's ROAS declines by 20%, your account-level profitability would shift dramatically. Concentration amplifies both gains and losses.

Ad spend is growing faster than revenue. Each day, you earn less profit per dollar of revenue. This pattern compounds — left unchecked, the lines will cross and the account becomes unprofitable.

You're spending the same amount but getting less back. Causes include: audience saturation (the best prospects already converted), creative fatigue (CTR declining), competitive pressure (CPCs rising), or seasonal demand shifts.

Your margin rate hasn't changed — the algorithm is selling lower-margin products at higher volume. The per-sale profit is the same, but the product mix has shifted toward cheaper items that generate less total profit.

Google Ads reports significantly more revenue than GA4 confirms. Your profit calculations based on Ads data are over-optimistic. Margin erosion is worse than the Ads dashboard suggests.

The absolute dollar amount this campaign loses every reporting period. Pausing it recovers this exact amount — not a projection, not a model, just money that stops leaving your account.

These campaigns are already profitable at current spend. Increasing budget here is the safest reallocation available — you're adding fuel to a proven engine.

Your bidding target is set lower than the minimum ROAS needed to break even after COGS. The algorithm is performing exactly as instructed — hitting your target — but every conversion at that target is a loss.

The algorithm isn't even hitting break-even, regardless of what the target is set to. Signal quality or creative quality may be so poor that the algorithm cannot achieve the minimum viable ROAS.

Calculated as current spend multiplied by the performance gap ratio (how far below average ROAS the campaign sits), capped at 50%. A campaign with ROAS 50% below average gets a 50% budget cut recommendation.

How much of total spend is concentrated in the top campaign. High concentration amplifies every other risk — if that campaign degrades, there's no backup.

The coefficient of variation of daily profit. High volatility means profitability swings wildly — making forecasting impossible and increasing the chance of unexpected loss days.