ACOS: how efficient are the ads?
ACOS stands for advertising cost of sales. It is your ad spend divided by the sales that Amazon attributes to those ads.
If you spend $1,000 on ads and Amazon attributes $4,000 of sales to them, your ACOS is 25%. A lower ACOS means each ad dollar brings back more sales. ACOS only looks at ad-attributed sales, so it says nothing about the rest of your business.
TACoS: how much does advertising weigh on the whole business?
TACoS stands for total advertising cost of sales. It divides ad spend by all sales, including organic sales that did not come from ads.
Using the same example, if your total sales were $10,000, your TACoS is 10%. TACoS answers a different question: is advertising making the whole store healthier, or only moving sales around?
Why the pair matters more than either number
- A high ACOS with a falling TACoS can be a good sign. The ads may be building rank, so organic sales are growing and the ad share of the business is shrinking.
- A low ACOS with a rising TACoS can be a warning. You may be bidding only on terms you would have won anyway, or growth may have stalled.
- A rising ACOS and a flat TACoS often means your ads are getting more expensive but you are still holding your sales. That is a bidding or competition issue to investigate.
Find your break-even ACOS first
Before you set targets, work out how much you can spend on ads and still break even. Take your profit margin before advertising. If it is 30% of the selling price, then an ACOS of 30% means you break even on those ad-attributed sales, and anything above it loses money on the sale itself.
That does not mean a profit-making ACOS is always the goal. Launch campaigns often run above break-even on purpose to build reviews and rank. The point is to make that choice deliberately, with a limit and a review date.
How to use both in a weekly review
- Record ACOS and TACoS at campaign level and at account level every week.
- Compare each to your break-even and to the previous four weeks.
- Separate launch products from mature products and set different targets.
- Check organic sales trends beside ad sales. Growth in both is the healthiest pattern.
- Cut or lower bids on campaigns whose ACOS stays above target with no organic lift.
- Write down what you changed so you can tie results to decisions.
Common mistakes
- Judging every campaign against one ACOS target regardless of its job.
- Ignoring returns, fees and discounts when working out margin.
- Turning off ads to lower TACoS and losing the rank that produced organic sales.
- Comparing ACOS across different products without considering price and margin.
A full worked example
Take a product that sells for $40. Your cost of goods, marketplace fees and fulfilment add up to $28, so your profit before advertising is $12, or 30% of the selling price. That makes your break-even ACOS 30%.
Over a week you spend $600 on ads. Amazon attributes $2,400 of sales to them, so your ACOS is 25%, which is under break-even. Your total sales for the week are $6,000, so your TACoS is 10%. The ads are paying for themselves on the sales they drive, and they represent a tenth of total revenue.
Now imagine the next month. You raise bids and ad spend rises to $1,200, with $3,600 in attributed sales. ACOS climbs to 33%, above break-even, and total sales only rise to $6,600, so TACoS is 18%. Spend nearly doubled while sales barely moved. The pair of numbers shows what ACOS alone would not: you are paying more for sales you were already getting.
All figures here are made-up round numbers to illustrate the arithmetic. They are not benchmarks or results.
Setting targets that fit the job of each campaign
- Launch campaigns: accept a higher ACOS for a planned period to build reviews and rank. Set a spend cap and a review date.
- Defend campaigns: protect your own brand and product terms. These usually run at a lower ACOS.
- Growth campaigns: target new terms and audiences. Watch whether total sales rise, not just ad sales.
- Clearance campaigns: aim to move stock, accepting a lower margin on purpose.
Reading the signals together
Look at ACOS, TACoS, impressions, click-through rate, conversion rate and organic rank. If ACOS is high because conversion is low, the problem is often the listing, not the bids. If ACOS is fine but TACoS is rising, check whether organic sales are weakening. Bidding adjustments cannot fix a weak main image, a poor price or too few reviews.
Things that distort the numbers
- Attribution windows: ad sales appear in reports after a delay, so very recent days can look worse than they are.
- Promotions and coupons: they lift sales and can change ACOS for reasons that have nothing to do with bids.
- Seasonality: compare like with like periods rather than this week against a quiet month.
- Returns: ad-attributed sales may later be returned, which lowers real profit.
How we can help
Our Amazon PPC Management service sets ACOS and TACoS targets with you, reviews campaigns weekly and reports in plain language. Advertising results depend on your product, price and market, so we never promise a specific ACOS or sales figure.
