What is ACoS? Amazon’s key metric to add to your PPC jargon

ACoS, or Advertising Cost of Sale, is a key metric to measure the performance of your Amazon Marketing Services campaigns. You may recognize it as the inverse fraction of a more common metric: ROAS (sales revenue ÷ ad spend).

ACoS = ad spend ÷ sales revenue

Ideally, you are looking for an ACoS closer to 0.01% rather than 100% (an ACoS of 15% is better than an ACoS of 50%).

When I first came across the metric, I was not sure what ACoS’ relevance or importance was – since most people do not have ACoS in their common PPC vocabulary. Turns out, ACoS is a very helpful metric.

Why? ACoS can be used to determine success across all your AMS PPC campaigns even when your products are bringing in different revenue per unit sold. It even can be more helpful in your Amazon Marketing Services campaigns than calculating the common CPA (Cost Per Acquisition) metric.

How? Let’s take an example:

Product A Campaign:

• Revenue per unit: $50
• Spend: $10 ÷ Units sold 2 = CPA: $5
• Spend: $10 ÷ Sales Revenue $100 = ACoS: 10%
  • In other words, you’re spending a $0.10 on ads to make $1.00 of sales with that ad campaign.

Product B Campaign:

• Revenue per unit: $10
• Spend: $10 ÷ Units sold 2 = CPA: $5
• Spend: $10 ÷ Sales Revenue $20 = ACoS: 50%
  • In other words, you’re spending a $0.50 on ads to make $1.00 of sales with that ad campaign.

As you can see, the Product A Campaign and the Product B Campaign both have the same CPA, so it appears both campaigns are performing equally as efficiently. Wrong. CPA does not take revenue into account. If we only look at CPA when looking at campaigns with different per-unit product revenue, we are not looking at the whole picture. When we look at the “mystery metric,” ACoS, it is clear that one of these products is spending way more in proportion to what it is bringing in.

You may be thinking; the seller must set different CPA goals for the 2 different products and optimize toward their separate CPA goals. That is an option, one which I tried myself.

There are two major problems with that method:

• There is no metric to understand the efficiency of all your AMS PPC spend as an aggregate in comparison to the revenue they bring in.

Suppose I would like to spend only $.10 on every $1.00 of sales (an ACoS of 10%) across all my PPC campaigns on Amazon. In this instance, CPA is not an easy metric to use to achieve this goal.

In the above example, Product A Campaign was achieving the 10% ACoS goal. Product B Campaign was not. To achieve an ACoS of 10%, Product B will need to spend less to achieve the same revenue ($2 rather than $10) because the product is not bringing in as much revenue per unit.

• Revenue per unit: $10
• Spend: $2 ÷ Sales Revenue $20 = ACoS: 10%

Spend: $2÷ Units sold 2 = CPA: $2

Suppose I want to run an AMS campaign with all my bestseller products in one banner, i.e. Product A and Product B are in the same campaign. How do I evaluate performance with two different CPAs in the same campaign?

Currently there is no reporting in AMS that can break down how much ad spend was specifically spent for each specific product, so we simply cannot calculate a correct CPA for each product. Thus, we must rely on our trusted spend to revenue ratio, ACoS. If we optimize the campaign to bring in $1.00 for every $0.10 spent, we should be in good shape regardless of what our combined product CPA is.

Lastly, how do we optimize towards ACoS?

We optimize towards ACoS similarly to how we optimize towards CPA. We bid down on keywords that spend a lot with little revenue (their ACoS rate is above our target ACoS goal), and we bid up on keywords that spend less and bring in more. There are many metrics that are hard to gather via the Amazon UI. The good news: ACoS is not one of them. You can find ACoS on the main account campaign page as well as calculated in each campaign for each individual keyword in your campaigns.