Amazon ACoS Calculator

Keeping track of ACoS is extremely important for businesses of all kinds. You can't be running ads without checking how they perform.

Benefits of calculating ACoS are:

• Improved budget allocation for your Amazon ads
• Better decisions being made for your e-commerce business
• Increased Amazon advertising efficiency

You can calculate ACoS simply by using readily available online calculators, or use the formula below.

ACoS should only include the revenue that is directly contributed to the ads you are running, otherwise you might get wrong numbers.Do NOT include organic sales in your calculation.

In addition, make sure you are using the same dates for the ad spend/ad revenue.

There are multiple factors that can impact your ACoS on Amazon, but most important are:

• Targeting precision: If you are targeting audience that does not match your buyer intent, you will be paying for clicks that will never convert.
• Ad/Listing quality: The quality of your listings directly impacts the conversions. Low conversions rates increase your cost per sale, which can negatively impact your ACoS.
• Competition: Check PPC bid ranges before you start targeting certain keywords. Some might not be worth it (depending on your ACoS).

We've already mentioned that good ACoS is anything below 30%, but ideally you should target 25% or lower. Why? Well, if your ACoS is above 40%, in most cases you will not be making any money. Here is how:

• 40% spent on ads
• 30% spent on Amazon fees
• 30% on COGS.

So, in this example you are just working for free as your total costs are 100% of what you earn in sales.

Aim to keep ACoS at or below 30% so that you are closer to the profitability.

Target ACoS will depend on the stage at which your business is in currently. If you are in a product launch phase, you might be seeing up to 50% of ACoS which is fine as you are buying rankings, reviews, etc.

Once you are settled and you're focused on a growth, you should aim for an ACoS at 20-30% so that you can make a profit.

Target ACoS can be adjusted if needed. If you want to grow, raise ACoS; if you want to increase your profits; then lower it.

Breakeven ACoS is the maximum value you can afford before your advertising campaigns stop making money.

Because it tells you how much you can spend on ads before you start losing money. Every business must know their "breakeven" point or the point at which your business stops being profitable.

Seeing new sales from ads can feel really good, until you check your bank account.

If your revenue is up and your ACoS too high, you may still be losing money overall.

Breakeven ACoS = Gross profit margin %

Example:

• Selling price: $100
• Amazon fees: 30%
• COGS: 30%

Gross margin = 100% - 30% - 30% = 40%. So, in this example, your breakeven ACoS would be 40%. Anything above that would mean that you are losing on ad sales.

Advertising Cost of Sales measures how much you spend on ads vs. how much you earn, while RoAS (Return on Ad Spend) shows how many dollars you make for every dollar you spend on ads. ACoS is cost-focused while RoAS is return-focused.

If we use the same example:

• Total ad spend: $100
• Total ad revenue: $200

ACoS = 100 / 200 x 100 = 50%

RoAS = 2

So:

• 25% ACoS = 4.0 ROAS‍
• 33% ACoS = 3.0 ROAS‍
• 50% ACoS = 2.0 ROAS

They are essentially showing the same thing but in a slightly different framework. In practice, RoAS is used more for Google and Meta Ads, while ACoS is used for Amazon ads.