Use our free calculators below to calculate ACoS to ROAS, ROAS to ACoS.
E-commerce owners use online advertising to grow their business.
Measuring the performance of these online ads is a key metric.
Advertisers on almost all platforms use ROAS to measure ad performance while Amazon provides ACoS data.
Though both metrics are important marketing KPIs give different insights.
So what does that mean for you as an Amazon seller?
Read this article to understand the basics and conversions for ACos and ROAS.
ACoS stands for Advertising Cost of Sale.
It's a key metric for measuring the efficiency of advertising campaigns on Amazon Seller Central, particularly for sellers using Amazon's Sponsored Products or Sponsored Brands ads.
What it measures: ACoS tells you how much you spend on advertising to generate every dollar of sales through those ads.
Here's a breakdown of what ACoS measures:
Calculation: ACoS is calculated by dividing your total ad spend by your total sales generated from those ads, then multiplying by 100%.
Here's the formula:
ACoS = (Total Ad Spend / Total Sales from Ads) x 100%
Interpretation:
ROAS stands for Return on Ad Spend.
It's a key metric for measuring the efficiency of advertising campaigns across platforms.
Calculation: ROAS is calculated by dividing your total sales generated from the advertising campaign by your total ad spend, then multiplying by 100%.
Here's the formula:
ROAS = (Total Sales from Ads / Total Ad Spend) x 100%
Interpretation:
You can easily calculate ROAS from ACoS using a simple formula. Here is how
ROAS = 100 / ACoS
For example, if your ACoS is 20%, your ROAS would be 500%.
You can easily calculate ACoS from ROAS using a simple formula. Here is how
ACoS = 100 / ROAS
For example, if your ROAS is 500%, your ACoS would be 20%.
| Aspect | ACOS (Advertising Cost of Sale) | ROAS (Return on Advertising Spend) |
|---|---|---|
| Definition | The percentage of advertising spend relative to sales generated. | The revenue generated for every dollar spent on advertising. |
| Formula | (Advertising Spend / Sales) * 100 | Revenue / Advertising Spend |
| Metric Type | Cost-based | Revenue-based |
| Ideal Value | Lower is better | Higher is better |
| Perspective | Focuses on the cost of generating sales | Focuses on the revenue generated from advertising |
| Use Case | Used to control and minimize advertising costs relative to sales | Used to maximize revenue and measure the effectiveness of advertising spend |
| Industry Use | Commonly used in e-commerce and retail | Widely used across various industries including e-commerce, digital marketing, etc. |
| Interpretation | Lower ACOS indicates more efficient spending | Higher ROAS indicates more effective spending |
| Calculation Example | If $10,000 is spent on ads and $50,000 in sales is generated, ACOS = (10,000 / 50,000) * 100 = 20% | If $50,000 in revenue is generated from $10,000 in ad spend, ROAS = 50,000 / 10,000 = 5 (in percent 500) |
| Decision Making | Helps in deciding if advertising costs are within acceptable limits | Helps in deciding if advertising efforts are generating desired returns |
ACoS and ROAS are important metrics to measure advertisement campaign performance.
However, they provide different insights
Then, Which metric should I use?
Use ACOS when you want to understand the profitability of your campaigns, especially across product categories.
A lower ACOS is better because it means you're spending less on advertising per sale, potentially leading to higher profits.
Use ROAS when you want to understand the overall effectiveness of your campaigns and the ROI.
A higher ROAS is better because it means your campaigns are generating more revenue compared to the money you've invested.