What is ACOS? The basic metric for evaluating PPC campaigns on Amazon.
25 Mar 2020
What is ACOS on Amazon?
ACOS (Advertising Cost of Sales) is the ratio of PPC advertising expenditures to revenue generated only by those ads.
Formula:
ACOS = (ad cost / ad revenue) × 100%
Remember: you pay for the click immediately, but the sale may occur up to 7 days after the click (known as attribution). Therefore, fresh campaigns may appear to be "more expensive" until all conversions are completed.
Example and net profit
Let's assume:
Campaign cost: €400
Campaign revenue: €2,000 (100 pcs. × €20)
Cost of goods sold (COGS): €5
Amazon commission (referral): 15%
VAT: 19% (DE)
Estimating unit margin (simplifying as in the example):
€20 − 15% commission = €17.00
€17.00 − 19% VAT = €13.77
€13.77 − €5.00 COGS = €8.77 margin "before ads"
Unit margin / price: 8.77 / 20 = 43.85%
Selling 100 pcs.: €8.77 × 100 = €877
Net profit after ads: €877 − €400 = €477
Note: the above does not take into account FBA/FBM costs (storage, fulfillment, returns, etc.). In practice, add these to your calculations. (In the EU, commissions may be calculated on the amount excluding VAT – check the rules for your marketplace and category).
What ACOS is considered “good”?
It depends on your margin. The key figure is break-even ACOS (BE-ACOS), which is the point at which you "break even".
Formula (per unit):
BE-ACOS = (unit margin before ads / selling price) × 100%
In our example: 43.85%.
ACOS < 43.85% → you earn,
ACOS ≈ 43.85% → “break even”,
ACOS > 43.85% → you lose money.
Two campaigns with an ACOS of 20% can yield completely different profits if the products have different margins.
Launch of a new product
At the start, we often accept higher ACOS (higher CPC rates) to:
quickly build ranking and indexing on important keywords,
boost organic sales in subsequent weeks.
Consider this as an investment – you consciously sacrifice part (sometimes all) of the margin in the first month.
Monitoring ACOS
Look at various time windows (7/14/30 days) to avoid missing sudden cost increases.
Products that are cheap need more time to "heal" ACOS (less revenue for each conversion).
Analyze ACOS at the level of: overall, portfolio, campaign, ad group, ASIN, keyword.
Two practical tips
Calculate BE-ACOS for each product (including all costs: referral, FBA/FBM, VAT, COGS, returns). This is your line of defense.
Alongside ACOS, also track TACOS (Total ACOS = ad cost / total revenue), to see if ads also drive organic sales.
Do you have specific numbers and want to calculate BE-ACOS for your products? Send me the price, COGS, VAT, commission, and (if FBA) the fulfillment rate – I'll calculate it right away.