ACoS vs TACoS: which Amazon ads metric to manage

Amazon advertising reports are full of three-letter metrics, and different people use them to mean slightly different things. Picking the wrong one to manage to is a common reason for ad spend that looks fine in reports but loses money in practice. This guide explains the three numbers that matter most, shows how to work out your own break-even point, and suggests which number to set goals with.

The three numbers in plain terms

ACoS (advertising cost of sales) is ad spend divided by the sales Amazon attributes to your ads, shown as a percentage.

• Example: you spend $200 on ads and Amazon attributes $1,000 of sales to them. Your ACoS is 200 ÷ 1,000 = 20%.

ROAS (return on ad spend) is the same relationship turned upside down: attributed sales divided by ad spend.

• Same example: 1,000 ÷ 200 = a ROAS of 5.0. ROAS and ACoS always carry the same information. A 20% ACoS is a ROAS of 5, and a 25% ACoS is a ROAS of 4.

TACoS (total advertising cost of sales) divides ad spend by all of your sales, including organic sales that did not come from an ad click.

• If total sales in the same period were $4,000, your TACoS is 200 ÷ 4,000 = 5%.

A note on “attributed” sales: Amazon credits a sale to an ad if it happens within an attribution window after an ad click, and that window differs between ad types. Attributed sales are therefore not the same as the extra sales the ads caused, and you should be careful when comparing ad types with each other.

Work out your break-even ACoS

Your break-even ACoS is your profit margin before advertising, as a percentage of the selling price. Below it, the sales your ads bring in are profitable on their own; above it, each attributed sale loses money, before you count any knock-on effect on organic sales.

To work it out for one product:

1. Start with the selling price.
2. Subtract the landed cost of the product, including manufacturing, freight, and duties.
3. Subtract Amazon’s fees: the referral fee, fulfilment fees if you use FBA, and an allowance for storage.
4. Subtract an allowance for returns and any other costs per unit.
5. Divide what is left by the selling price.

Example: a product sells for $30, and all costs before advertising come to $21. The profit before advertising is $9, so the break-even ACoS is 9 ÷ 30 = 30%.

Work this out per product. Fees and costs vary, so a single break-even figure for the whole account is usually wrong.

What ACoS is good for, and its limits

ACoS is the right tool for judging individual campaigns, keywords, and targets: it shows where your ad spend turns into sales efficiently and where it does not.

It has real limits, though:

• It ignores organic sales. Ads can lift your organic ranking and sales, and ACoS cannot see that.
• Some campaigns are meant to run high. Launch campaigns often run above break-even on purpose, for a limited time.
• Some campaigns naturally run low. Campaigns on your own brand name often show a low ACoS because those shoppers were already looking for you.
• Comparing products can mislead. A 35% ACoS can be very profitable on a high-margin product and a loss on a low-margin one.

What TACoS tells you

TACoS shows how dependent the whole business is on advertising. Track it monthly, per product or per brand.

• TACoS falling while total sales hold steady or grow suggests organic sales are growing relative to ad spend, which is usually a healthy sign.
• TACoS rising while total sales stay flat suggests you are buying the same sales with more ad spend rather than building lasting demand.

To calculate it you need total sales, which you can find in the Business Reports section of Seller Central.

Which number should you manage to?

There is no single answer, but these rules of thumb work for most sellers:

• If profit is the priority, set an ACoS target below the break-even point for each product, and watch the TACoS trend for the business as a whole.
• If growth or a launch is the priority, accept a higher ACoS for a defined period with a budget cap and a plan to bring it down, and judge success by the TACoS and organic sales trend over time.
• For mature products, use TACoS as the headline number and ACoS at campaign and keyword level.

Whatever you choose, agree the definitions and targets in writing with whoever manages your ads, so everyone is reading the same numbers.

Common mistakes

• One ACoS target for every product, regardless of margin.
• Comparing ad types directly without allowing for their different attribution windows.
• Cutting all high-ACoS spend without checking whether it brings in new customers or supports organic ranking.
• Reporting in two currencies, for example ROAS to one person and ACoS to another. Pick one and stick to it.
• Judging changes too early. Give changes time to settle, and allow for seasonality before drawing conclusions.

Get help from a reviewed specialist

If you would rather have an expert set targets and run the account, you can compare reviewed Amazon PPC specialists, or describe what you need and we will suggest suitable specialists. Our guide on how to choose an Amazon PPC manager lists the questions to ask before you hire.