ACoS stands for advertising cost of sale, and it is a key metric used in online advertising, particularly on platforms like Amazon. ACoS measures the effectiveness and efficiency of advertising campaigns by calculating the ratio of advertising spend to the revenue generated from those advertisements. This metric is commonly used by marketers engaging in pay-per-click (PPC) advertising, where the advertiser pays for each click on their ads.

A lower ACoS indicates that the advertising campaign is generating sales at a relatively lower cost, making it more efficient and profitable. On the other hand, a higher ACoS suggests that the advertising spend is relatively higher compared to the revenue generated, indicating that adjustments may be necessary to optimize the campaign and improve profitability.

ACoS is expressed as a percentage and is calculated using the following formula:

ACoS = (Advertising Spend / Sales Revenue) x 100

So if you spend $100 on advertising to make $1,000 of revenue, that’s an ACoS of 10%.

The break-even ACoS is the point at which your ACoS is equal to your profit margin. If you spend more than you make on advertising, you’re losing money. If your ACoS is less than what you make, you’ll be making a profit. If you’re not sure how to calculate break-even ACoS, try our ACoS calculator. Simply enter your costs and revenue, and it will perform the calculations for you.

Knowing your break-even ACoS helps you manage your advertising budget more efficiently. The results from our break-even ACoS calculator can be used to make informed decisions about your ad spending and pricing. A break-even ACoS can be used as a measuring stick to highlight if an ad campaign is under-performing.

A good ACoS percentage is one that is lower than the break-even ACoS. The average ACoS on Amazon is around 27%. However, this metric cannot be considered in isolation. The cost you should aim for depends on various factors such as industry, product margins, and business goals. Some sellers may aim for a low ACoS, while others may prioritize increased visibility and sales volume even with a higher ACoS.

Monitoring and analyzing ACoS can help you assess the performance of your campaigns, identify areas for improvement, and make data-driven decisions to maximize the return on investment (ROI) from your advertising efforts.

By examining your ACoS on a per-SKU basis, you can see which products are performing the best and also identify products that aren’t selling well or that you’re advertising at a loss.

If you have a high ACoS, that could indicate one of several things:

• You’re advertising in a very competitive niche,
• You’re choosing high-competition keywords,
• The advertisements are poorly targeted,
• The margins on your products are too thin.

Anything that increases your conversion rate will improve your ACoS. Start by looking at your listings to ensure they’re targeting the right keywords, include eye-catching images, and are well-written.

Pay particularly close attention to your product titles. The title is the first thing your prospective customers will see when your ad is displayed in the search results. Ensure the title includes enough information to entice a shopper to click on the ad. For example, if you’re selling a garment, include the size(s), colors, materials, and patterns.

With all this information in your listing’s title, you’ll be more likely to attract clicks from a customer looking for something that matches those details. If the rest of the listing is well designed, most buyers are likely to choose to purchase your item rather than go back to the search results and compare other products.

In addition, revisit your keyword research. Ensure your ads target long-tail keywords relevant to your target audience. If your ACoS is currently above your break-even point, avoid high-competition keywords and focus on ones you can get impressions with for a lower bid amount.

The decision to use RoAS (return on advertising spend) or ACoS (advertising cost of sale) depends on your specific advertising goals, business model, and preferences. Both metrics provide valuable insights into the performance of your advertising campaigns, but they focus on different goals.

• ACoS: If your primary focus is on understanding the profitability and efficiency of your advertising campaigns, ACoS might be more suitable. ACoS measures the percentage of advertising spend relative to the sales revenue generated. It helps you assess how effectively your advertising budget is utilized and whether your campaigns are generating sales at a reasonable cost. ACoS is commonly used in eCommerce platforms like Amazon, where sellers want to be able to subtract ACoS from their profit margins to determine their true profit. 

• RoAS: On the other hand, if you want a broader view of the overall return on investment (ROI) from your advertising spend, RoAS might be more appropriate. RoAS calculates the revenue generated for each dollar spent on advertising. It provides a ratio that helps you evaluate the effectiveness of your advertising campaigns in driving revenue. RoAS is used more for businesses with a growth objective who can use it to easily calculate the outcome of their advertising efforts.

Ultimately, both metrics can be valuable depending on your specific goals.

Reducing Amazon advertising costs requires a strategic approach and ongoing optimization. In addition to using our Breakeven ACOS calculator, here are some tips to help you reduce your advertising costs:

1. Targeted Audience: Ensure that your advertising campaigns are reaching the right audience. Refine your targeting options, such as demographics, interests, and geographic locations, to focus on the most relevant potential customers. This can help improve the efficiency of your campaigns and reduce wasted ad spend.
2. Keyword Optimization: Conduct thorough keyword research to identify high-performing keywords that are relevant to your products or services. Focus on long-tail keywords that have lower competition and cost-per-click (CPC). By optimizing your keyword selection, you can increase the chances of reaching customers who are actively searching for what you offer, while minimizing unnecessary costs.
3. Ad Quality and Relevance: Create compelling and relevant ad content that resonates with your target audience. Well-crafted ad copy and appealing visuals can improve click-through rates and conversion rates, leading to better return on investment. Enhance the relevance of your ads by aligning them closely with the landing page or product page they direct users to, ensuring a consistent and seamless user experience.
4. Ad Campaign Optimization: Regularly monitor and analyze the performance of your ad campaigns. Identify underperforming ads, keywords, or targeting options and make necessary adjustments. Experiment with different ad formats, bidding strategies, and ad placements to find the most cost-effective options. Continuously optimize your campaigns based on data-driven insights to maximize results while minimizing costs.
5. Budget Management: Set daily or monthly budget caps to control your advertising spend. This helps prevent overspending and ensures that your advertising costs stay within your desired limits. Regularly review and adjust your budgets based on campaign performance and overall business objectives.
6. Seasonality and Trends: Be mindful of seasonal fluctuations and trends in your industry. Adjust your advertising efforts accordingly to capitalize on high-demand periods and optimize your costs during slower periods. Stay informed about market dynamics and adjust your campaigns to stay competitive while minimizing unnecessary expenses.

By implementing these strategies and closely monitoring your advertising campaigns, you can effectively reduce your advertising costs while maximizing the impact and return on your ad spend. Remember to regularly evaluate and fine-tune your approach based on performance data and changes in the advertising landscape.