ACoS

ACoS (Advertising Cost of Sales) is the percentage of advertising-driven revenue that was spent on the advertising itself. The formula is ad spend divided by ad revenue, multiplied by a hundred. Spend 200 euros to generate 1,000 euros of sales and your ACoS is 20%.

It is the headline efficiency metric on Amazon PPC and most other marketplace advertising, and it answers one narrow question well: how much did these ads cost relative to what they directly produced.

Break-even ACoS is just your profit margin

This is the part most ACoS advice skips, and it is the only way to know whether a target is sensible rather than borrowed from somebody else's business.

Your break-even ACoS equals your profit margin before advertising. If a product sells for 50 euros and costs 35 euros once you account for landed cost, marketplace fees and fulfilment, you keep 15 euros, which is 30% of the sale price. At 30% ACoS you break even on every advertised sale. Below that you make money, above it you lose money on that sale.

Which means there is no universal good ACoS. A product with 50% margins and a product with 15% margins can run the same campaigns and reach opposite conclusions about whether they are working. Anyone quoting a target percentage without knowing your margin is guessing.

ACoS, TACoS and ROAS

ACoS and ROAS carry identical information. A 25% ACoS is a 4x ROAS, and which one a team uses is mostly convention: marketplace advertising tends toward ACoS, paid social and search toward ROAS.

TACoS is the one that catches problems ACoS hides. A campaign can post a falling ACoS while total sales stay flat, which usually means the ads are capturing demand that would have converted organically. Our guide to setting ACoS and TACoS targets goes further into reading them together.

When a high ACoS is the right answer

Running above break-even is a deliberate choice in several situations, and treating ACoS as a number to always minimise misses them.

• Launches. Ad-driven sales contribute to the sales velocity that influences organic rank. Early spend buys a position that keeps earning after the campaign normalises.
• Defending branded terms. Competitors bidding on your brand name are cheap to block and expensive to ignore, even when the ACoS looks unflattering against sales you might have won anyway.
• Clearing aged stock. Losing a few points of margin to move inventory beats paying storage fees on units that are not selling.
• Products with repeat purchase. If customers reorder, the first sale can run at a loss and the relationship still pays.

What brands get wrong with ACoS

• Copying a target from somebody else. Break-even is set by your margin. A benchmark from a different category or cost structure tells you nothing about your own campaigns.
• Driving ACoS down by cutting everything. Pausing every campaign above target produces an excellent ACoS and a shrinking business. The TACoS trend is what reveals this.
• Calculating margin without the full cost. A break-even built on product cost alone, ignoring marketplace fees, fulfilment and returns, sets the target too high and quietly loses money on every sale.
• Judging new campaigns too early. Early ACoS is noisy while the campaign gathers data, and killing campaigns in the first days throws away the learning period they need.

FAQ

What is a good ACoS?
There is no universal figure. Your break-even ACoS equals your profit margin before advertising, so a product with 40% margins and one with 15% margins have completely different targets. Calculate your own rather than borrowing a benchmark.

What is the difference between ACoS and ROAS?
They express the same relationship inverted. ACoS is spend divided by revenue as a percentage, ROAS is revenue divided by spend as a multiple. A 25% ACoS and a 4x ROAS describe identical performance.

Should I always try to lower my ACoS?
No. Launches, brand defence, inventory clearance and products with repeat purchase can all justify running above break-even deliberately. Minimising ACoS without looking at total sales usually means shrinking the business while the report looks better.

Setting ACoS targets from real margin data, per product and per marketplace, is part of how eBrands runs advertising for the brands we operate. See how we run Amazon end to end.