What Is ACoS?
ACoS stands for advertisement cost of sale. It is the key metric used in online advertising on the Amazon platform.
It measures the performance of advertisement campaigns by calculating the ratio of your ad budget to your ad revenue.
Let us understand this by an example. For instance, if you spend $10 on advertisement and generate $50 in sales your ACoS is 20%.
How to calculate ACoS?
Calculating ACoS is straightforward. Follow these 4 simple steps to calculate your advertisement cost of sale.
- Find out your total ad sales, for instance, $500.
- Find out your total ad spend, say $100.
- Divide your ad spend by the total sales, $100 รท $500 = 0.2.
- Convert to percentage: 0.2 * 100 = 20%.
The ACoS formula
The Advertising Cost of Sales formula is
ACoS = (Total Ad Spend / Total Ad Revenue) x 100
What is a good ACoS value?
There is no benchmark for good ACoS, it depends upon your industry and goals for your ad campaign.
If your goal is to maximize the profit you can set a low ACoS ideally below 20%. But if your goal is high visibility in your niche or brand you set a high ACoS even more than 40%.
You should wisely choose the right ACOS based on your goal.
- To maximize sales you should focus on break-even ACoS
- To maximize impressions aim for break-even ACoS
- To get the necessary profit margin you should focus on target ACoS
In general, a good ACoS percentage is lower than the break-even ACoS. The average ACoS on Amazon is around 27%.
What is breakeven ACoS?
Breakeven ACoS is the point where you make zero profit from your Ads. In other words, it is the ACoS at which you neither make a profit nor incur a loss from your advertisements.
If your ACoS is lower than your break-even ACoS, then your ads are profitable because you're spending less on advertising than the profit you make from sales.
If your ACoS is higher than your break-even ACoS, then your ads are not profitable because you're spending more on advertising than the profit you make from sales.
How do you calculate your breakeven ACoS?
Here's how to calculate your break-even ACoS:
Break-even ACoS = ((Ad Revenue - Cost of Goods Sold) / Ad Revenue) x 100
