ACoS is a metric used to measure the performance of an Amazon PPC campaign. It is the ratio of Amazon’s ad spend to the ad revenue generated, and is expressed as a percentage.
The process of optimizing advertising campaigns on Amazon the analysis of ACoS values is essential. With this metric you can effectively track the high advertising expenses in relation to revenue. If the ACoS objective of the campaign has been previously defined with precision, conclusions can be drawn about its profitability.
How to calculate the ACoS?
The formula for calculating the advertising cost of sale is as follows:
ACoS = ad spend ÷ ad revenue x 100
In short, Amazon ACoS shows how much you spend per click and how much you earn in return. For example, if we generate sales of € 25 with the word “yellow shoes” with an advertising cost of € 0.50, our ACoS is 2%. This means that we have invested 5% of our revenue in advertising:
ACoS = €0.50 advertising expenses ÷ €20 sales x 100 = 2%
The higher Amazon ACoS, the more expensive the ads for this product and the more you should invest in advertising in relation to the sales generated. On the other hand, the lower Amazon ACoS, the lower the advertising costs relative to sales.
Keep in mind that it depends on what the objective of the campaign is. If the goal is to achieve the highest possible visits instead of the highest conversions, it may be good for ACoS to increase.
ACoS break-even point
The ACoS break-even point is very important, since it allows to know if the campaigns are generating profits or losses. Equilibrium ACOS helps make well-informed decisions about supply adjustments and other factors that influence profitability.
The advantages of ACoS
ACoS takes into account all the revenue generated by advertising: If certain advertised products and keywords are very good at generating high revenue after a click (for example, by creating a greater number of purchases or selling additional products), it will optimize your PPC campaigns to invest more in these products and keywords than in others: You will then get higher revenue per conversion/order in total than other combinations of products and keywords.