What Is a Good ACoS on Amazon? (And Why Most Sellers Get It Wrong)

So, you’re trying to figure out what a ‘good’ Amazon ACoS actually is. It’s a question a lot of sellers ask, and honestly, it’s easy to get tripped up by the numbers. People see ‘lower is better’ and just run with it, but that’s not the whole story. We’re going to break down what Amazon ACoS really means and why chasing a low number might actually be hurting your business more than helping it. It’s all about understanding the bigger picture and what these numbers mean for your actual profit.

Key Takeaways

• ACoS, or Advertising Cost of Sales, shows how much you spend on ads compared to the sales those ads bring in. It’s a percentage that tells you if your ad campaigns are working efficiently.
• There’s no single ‘good’ ACoS number that fits everyone. What’s good for one seller might be terrible for another, depending on things like profit margins, product type, and what you’re trying to achieve with your ads.
• Your break-even ACoS is tied directly to your profit margin. To make money on ad sales, your ACoS needs to be lower than your profit margin.
• Factors like how relevant your keywords are, how much you bid, the quality of your product listing, and your pricing all play a big role in your ACoS. Don’t just focus on the ad spend itself.
• Don’t get too hung up on ACoS alone. Look at other metrics like TACoS (Total Advertising Cost of Sales) and overall profit to get a real sense of how your advertising is impacting your entire business.

Understanding Amazon ACoS: The Core Metric

Defining Advertising Cost of Sales (ACoS)

Advertising Cost of Sales, or ACoS for short, is a key number Amazon uses to show how well your ads are doing. Think of it like this: for every dollar you spend on ads, how many cents do you get back in sales? That’s basically what ACoS tells you. It’s a percentage that compares your ad spend to the sales those ads directly brought in. So, if your ACoS is 30%, it means that 30% of the sales generated by your ads went right back into paying for those ads. It’s a pretty straightforward way to see if your advertising money is working hard for you.

How Amazon ACoS Is Calculated

Calculating ACoS is actually quite simple. Amazon uses a basic formula:

ACoS = (Total Ad Spend / Total Ad-Attributed Sales) * 100

Let’s say you spent $100 on ads in a week, and those ads led to $300 in sales. Your ACoS would be ($100 / $300) * 100, which equals 33.3%. This means a third of the sales driven by your ads were used to cover the ad costs. It’s a direct measure of your ad efficiency.

ACoS vs. Return on Ad Spend (ROAS)

You’ll often hear ACoS mentioned alongside ROAS, or Return on Ad Spend. They’re really two sides of the same coin, just presented differently. While ACoS tells you the percentage of sales revenue spent on ads, ROAS tells you how much revenue you get back for every dollar spent on ads.

Using our previous example:

• ACoS: 33.3% (meaning 33.3% of sales went to ads)
• ROAS: ($300 Sales / $100 Ad Spend) = 3 (or 300%)

So, a ROAS of 3 means for every $1 you spent on ads, you got $3 back in sales. Many sellers find ROAS easier to think about when comparing different investment opportunities, but ACoS is what Amazon primarily uses within its ad console. Both metrics are important for understanding your ad performance, but they measure the same core relationship between ad cost and ad revenue.

Debunking the ‘Good’ Amazon ACoS Myth

It’s easy to get caught up in the numbers when you’re selling on Amazon, and ACoS is often the first one people fixate on. You see articles, forum posts, and even Amazon’s own suggestions, all talking about what a “good” ACoS looks like. But here’s the thing: there’s no magic number that works for everyone. Trying to hit a universal target is like trying to find a single shoe size that fits every foot – it just doesn’t work.

Why There’s No Universal ‘Good’ ACoS

Amazon itself is pretty clear on this. They don’t publish a definitive “good ACoS” percentage because it’s just too dependent on too many variables. What might be a fantastic ACoS for one seller could be a disaster for another. It really comes down to your specific situation and what you’re trying to achieve.

Factors Influencing Your Ideal ACoS

So, if there’s no one-size-fits-all answer, what determines your ideal ACoS? It’s a mix of things:

• Your Profit Margins: This is probably the biggest one. If your profit margin on a product is 20%, then an ACoS above 20% means you’re losing money on those ad-driven sales. If your margin is 40%, you have more room to play with.
• Your Business Goals: Are you trying to grow as fast as possible, even if it means spending more on ads initially? Or is your main focus right now on maximizing profit from every sale? Your goal dictates how much you can afford to spend on advertising relative to sales.
• Your Product Category: Some categories are naturally more competitive, with higher ad costs and lower margins. Others are less crowded. This impacts what a sustainable ACoS looks like.
• Your Campaign Stage: A brand new product launch will likely have a higher ACoS than a product that’s been selling well for a while and has built up organic ranking and reviews.

The Danger of Chasing a Low ACoS

This is where many sellers get it wrong. They see “low ACoS” as the ultimate win. But sometimes, a higher ACoS can actually be a good thing. Think about it: if your ads are driving a lot of visibility and helping your product rank higher organically, you might be getting more total sales (paid + organic) even if the ACoS for the paid portion looks high. Focusing solely on lowering ACoS can mean missing out on overall sales growth.

It’s not always about spending less; it’s about making more. A higher ACoS isn’t automatically bad if it leads to significantly more overall sales and profit. You need to look at the bigger picture, not just the ad-attributed revenue.

Consider this: would you rather have a 15% ACoS with $1,000 in profit, or a 35% ACoS with $5,000 in profit? The second option, despite the higher ACoS, is clearly better for your business bottom line. This is why understanding your break-even ACoS and total advertising cost of sales (TACoS) is so important, which we’ll get into next.

Connecting Amazon ACoS to Profitability

Okay, so we’ve talked about what ACoS is and why there’s no magic number that works for everyone. But the real question on every seller’s mind is: how does this advertising cost actually connect to making money? It’s not just about spending less on ads; it’s about spending smart so you actually profit.

Understanding Your Profit Margins

Before you can even think about a ‘good’ ACoS, you absolutely have to know your profit margins. This is the money left over after you’ve paid for everything – the product itself, shipping, Amazon’s fees, overhead, you name it. If you sell a widget for $20, and all your costs add up to $15, you’ve got $5 left. That’s a 25% profit margin ($5 / $20).

This number is your starting point. Your ad spend needs to be less than this margin if you want to make money on sales driven by ads. It’s that simple.

Calculating Your Break-Even ACoS

Think of your break-even ACoS as the exact point where your advertising costs equal the profit you make from those ads. It’s directly tied to your profit margin. If your profit margin is 25%, then your break-even ACoS is also 25%.

• ACoS below your break-even point means you’re making money on ad-driven sales.
• ACoS above your break-even point means you’re spending more on ads than you’re earning back from those specific sales.

So, if your profit margin is 25%, and your ACoS is 20%, great! You’re in the green. But if your ACoS jumps to 30%, you’re losing money on those ad sales. You can use an ACoS calculator to help figure this out.

Ensuring ACoS Stays Below Profitability Thresholds

Once you know your break-even ACoS, you can set a target ACoS. This is the ACoS you aim for to achieve your desired profit. The formula is pretty straightforward: Target ACoS = Break-Even ACoS – Target Profit Margin.

Let’s say your break-even ACoS is 25% (meaning your profit margin is 25%), and you want to make a 10% profit on top of that. Your target ACoS would be 15% (25% – 10%). This means you need to keep your ad spend at or below 15% of your ad-attributed sales to hit that 10% profit goal.

It’s easy to get caught up in just looking at the ACoS number in your Amazon Seller Central dashboard. But without understanding what that number means in relation to your actual product costs and desired profit, it’s just a number. Connecting ACoS to your bottom line is what turns advertising from a cost center into a profit driver.

Here’s a quick look at how it breaks down:

This table shows why a 20% ACoS might be fantastic for Product A but a disaster for Product B. It all comes back to your margins and what you want to achieve with your advertising.

Key Factors That Shape Your Amazon ACoS

So, you’re looking at your ACoS and wondering why it’s not where you want it to be. It’s easy to think it’s just about bids or keywords, but honestly, it’s a bit more involved than that. Several moving parts influence this number, and understanding them is key to actually making your ad spend work for you.

The Role of Keyword Relevance and Targeting

Think of keywords as the bridge between what a shopper is looking for and your product. If that bridge is built in the wrong place, you’re going to get clicks from people who aren’t actually interested in buying what you’re selling. This means wasted ad spend and a higher ACoS. It’s not just about stuffing your ads with every possible keyword; it’s about being smart. Using relevant keyword sets, including exact matches for terms that convert well and broader terms for discovery, is important. Amazon’s advertising system relies heavily on this relevance to show your ads to the right audience. Getting your targeting right is the first step to making sure your ad dollars are spent effectively.

Impact of Bid Levels and Cost-Per-Click (CPC)

Your bids directly affect how often your ads show up and how much you pay for each click. If you’re in a competitive niche, bids can get pretty high. While a higher bid might get you more visibility, it’s only a good thing if those clicks actually turn into sales. If you’re paying a lot per click but not seeing a return, your ACoS will climb fast. It’s a balancing act: you need to bid enough to be seen, but not so much that you can’t afford to make a sale. This is where understanding your profit margins becomes really important, so you know your limits.

How Listing Quality Affects Conversion Rates

This is a big one that many sellers overlook. Your product listing is your virtual salesperson. If it’s not compelling, clear, and persuasive, shoppers might click on your ad but then bounce without buying. Things like fuzzy images, confusing titles, weak bullet points, or a lack of good product information can all hurt your conversion rate. A strong listing, on the other hand, can significantly improve the percentage of clicks that turn into sales. This directly lowers your ACoS because you’re getting more sales for the same amount of ad spend. A good listing is crucial for winning ad spots at a lower cost and converting clicks into sales.

Pricing Strategy and Offer Competitiveness

Your price point and how competitive your offer is play a huge role. If your price is higher than competitors, or if you frequently lose the Buy Box, shoppers might see your ad but choose a different seller. This impacts your conversion rate and, consequently, your ACoS. Being competitive doesn’t always mean being the cheapest; it means offering a good value proposition. Sometimes, even small things like shipping speed or offer positioning can make a difference in whether a shopper decides to buy from you or someone else.

ACoS is a reflection of how well your advertising is working, but it’s also a mirror showing the health of your product listing and your overall offer. If your ACoS is high, don’t just blame the ads; look at your product page, your price, and your competition.

Here’s a quick look at how these factors interact:

Beyond ACoS: A Holistic View of Performance

Looking only at ACoS can feel like trying to understand a whole car by just looking at the speedometer. It tells you something important, sure, but it’s not the whole story. To really know if your Amazon advertising is working for your business, you need to zoom out and see how it fits into the bigger picture.

The Importance of Total Advertising Cost of Sales (TACoS)

ACoS tells you how much you’re spending on ads compared to the sales those ads directly bring in. But what about the sales that happen because your ads are making your product more visible overall? That’s where TACoS comes in. It measures your total ad spend against your total sales revenue, not just the sales directly tracked by Amazon Ads.

Think of it this way:

• ACoS: Ad Spend / Ad-Attributed Sales
• TACoS: Ad Spend / Total Sales Revenue

If your ACoS is a bit high, but your TACoS is stable or even going down while your total sales are climbing, it’s a good sign. It means your ads are doing more than just driving immediate sales; they’re boosting your product’s overall visibility and ranking, leading to more organic sales too. TACoS gives you a clearer view of advertising’s impact on your entire business.

How ACoS Relates to Overall Business Health

Your advertising efforts don’t exist in a vacuum. They need to support your business goals, and that means looking beyond just ad performance metrics. Consider these points:

• Profit Margins: Are your ads helping you make money, or are you just moving product at a loss? Your profit margin is the ultimate deciding factor.
• Inventory Levels: Are your ads driving sales faster than you can restock? Or are they sitting idle while you have too much stock?
• Brand Awareness: Are your campaigns increasing how many people know about your brand, even if they don’t buy immediately?
• Customer Lifetime Value: Are the customers you’re acquiring through ads becoming repeat buyers?

Considering Other Key Performance Indicators (KPIs)

To get a true sense of your advertising performance, you need to look at ACoS alongside other metrics. These numbers provide context and help you understand why your ACoS is what it is.

• Click-Through Rate (CTR): How many people see your ad and actually click on it? A low CTR might mean your ad isn’t grabbing attention.
• Conversion Rate (CVR): Of the people who click, how many actually buy? A low CVR could point to issues with your product listing or pricing.
• Impressions: How often are your ads being shown? This tells you about your ad’s reach.
• Return on Ad Spend (ROAS): This is the flip side of ACoS, showing how much revenue you get for every dollar spent on ads. It’s often easier to compare ROAS to your profit margins.

Focusing solely on a low ACoS can sometimes lead you to miss out on significant growth opportunities. It’s about finding the right balance where your advertising spend drives profitable sales and supports your overall business objectives, not just a single metric.

By looking at TACoS and other related KPIs, you get a much more complete picture of how your Amazon advertising is performing and whether it’s truly contributing to your business’s success.

Strategies for Optimizing Amazon ACoS Effectively

So, you’ve got your ACoS numbers, and maybe they’re not quite where you want them. That’s okay. The good news is, there are concrete steps you can take to get your advertising costs in line with your sales goals. It’s not about magic; it’s about a systematic approach to refining what you’re doing.

Auditing Campaign Performance for Efficiency

First things first, you need to know what’s working and what’s not. Staring at a single ACoS number for your whole account won’t cut it. You’ve got to dig into the details. Look at individual campaigns, ad groups, and even specific keywords or products.

• Identify top performers: Which campaigns are bringing in sales without costing an arm and a leg? These are your golden children. See what makes them tick.
• Spot the underperformers: Where is money going out with little or no return? These campaigns are draining your budget and need immediate attention.
• Check campaign age: A brand new campaign might have a sky-high ACoS just because it hasn’t had enough time or data to settle. Give it a fair shot before making drastic changes.

Amazon’s Advertising Console is your friend here. It shows you ACoS alongside other metrics like Click-Through Rate (CTR) and Conversion Rate (CVR). If CTR is low, maybe your ad isn’t grabbing attention. If CVR is low, perhaps the product page isn’t convincing enough. Looking at these related metrics gives you a much clearer picture than just ACoS alone.

Optimizing Targeting and Keyword Mix

Your keywords are the gateway to your ads. If you’re targeting the wrong ones, you’re essentially paying to show your products to people who aren’t interested. This is a fast track to a high ACoS.

• Review search term reports: This is where the gold is. See what actual search terms shoppers are using when they click your ads. If you find irrelevant terms that are costing you money, add them as negative keywords. This is a simple but powerful way to stop wasted ad spend.
• Refine match types: Are you using broad match too much? While it can cast a wide net, it often pulls in a lot of irrelevant traffic. Consider shifting spend to more precise phrase or exact match keywords that you know convert well. For Sponsored Brands, Amazon suggests using a mix of keyword types to cover more ground.
• Add new relevant keywords: Found some great search terms in your reports? Add them into your manual campaigns as exact or phrase match keywords. This helps you gain more control over your ad spend.

Improving Product Listing Effectiveness

Think about it: your ad gets someone to click, but if the product page doesn’t seal the deal, that click was wasted money. Your listing quality directly impacts your conversion rate, which in turn affects your ACoS. A better conversion rate means a lower ACoS, all else being equal.

• High-quality images and video: Are your visuals sharp and appealing? Do they show the product from multiple angles and in use?
• Compelling copy: Does your title clearly state what the product is? Do your bullet points highlight the key benefits and features? Is your description informative and persuasive?
• Competitive pricing: Is your price in line with similar products on Amazon? If you’re significantly higher, shoppers might click away.

If your listing is weak, even the best ad targeting won’t save you. Improving your product detail page is a fundamental step to lowering ACoS. You can find more strategies for optimizing your listings here.

Strategic Bid Management Techniques

Bids are how you tell Amazon how much you’re willing to pay for a click. Getting this wrong can quickly inflate your costs.

• Adjust bids based on performance: Don’t just set a bid and forget it. If a keyword or product is converting well and has a low ACoS, consider increasing its bid slightly to capture more of that profitable traffic. Conversely, if a keyword is expensive and not converting, lower its bid or pause it.
• Use negative keywords: We mentioned this before, but it’s worth repeating. Negative keywords are your best friend for cutting costs. They prevent your ads from showing up for irrelevant searches.
• Consider bid adjustments: For Sponsored Products, you can adjust bids based on placement (top of search vs. other pages) or customer engagement. Experiment with these to see what works best for your products.

Managing bids effectively is a balancing act. You want to be competitive enough to get your ads seen, but not so aggressive that you’re overpaying for clicks that don’t lead to sales. It requires ongoing monitoring and adjustment based on real-time data.

By systematically auditing your campaigns, refining your targeting, improving your listings, and managing your bids smartly, you can make significant progress in optimizing your Amazon ACoS and driving more profitable sales.

Interpreting ACoS in Different Campaign Stages

So, you’ve got your ACoS numbers, but what do they actually mean? It’s not a one-size-fits-all situation, especially when you look at where your product is in its lifecycle. What’s considered a win for a brand new item might be a red flag for a seasoned bestseller.

ACoS During Product Launches

When you first introduce a product, your ACoS is likely to be higher than you’d ideally want. Think of it as an investment. You’re trying to get the product noticed, gather initial sales data, and build up reviews. Amazon’s algorithms need information to figure out who to show your ads to, and that takes time and clicks. During this phase, you might see:

• Higher Spend: You’re pushing ads more aggressively to gain visibility.
• Lower Click-Through Rates (CTR): Shoppers might not be familiar with your product yet, so they’re less likely to click.
• Lower Conversion Rates (CVR): Without established trust or reviews, customers might hesitate.

The goal here isn’t immediate profit; it’s market entry and data collection. You’re often willing to accept a higher ACoS, sometimes even above your break-even point, to get the ball rolling. It’s about building momentum for the long haul. Many brands accept ACoS closer to break-even during launch while they build data, reviews, and rank, then aim to bring ACoS down as the product matures.

During a product launch, a higher ACoS is often a necessary evil. It’s the cost of entry to gain visibility and gather crucial data that will inform future, more profitable campaigns.

ACoS for Growth and Scaling Phases

Once your product has some traction – you’ve got reviews, sales history, and a better understanding of your target audience – you move into a growth phase. Here, you’re looking to scale your sales while keeping an eye on efficiency. Your ACoS should ideally start to decrease from the launch phase. You’ll want to:

• Optimize Keywords: Focus on the search terms that are driving profitable sales.
• Refine Bids: Adjust bids based on performance, increasing for high-performing keywords and decreasing for underperformers.
• Expand Targeting: Explore new audiences or product targeting opportunities.

This is where you start to see the benefits of your initial investment. You can begin to scale Amazon PPC profitably by focusing on keywords that align with your profit margins. The aim is to find a balance where you’re increasing sales volume without letting your ACoS creep back up too high.

ACoS When Focusing on Profitability

For mature products or when your business strategy shifts to prioritize profit over aggressive growth, your ACoS targets become much tighter. You’re no longer just looking to sell more; you’re looking to sell more profitably. This means:

• Strict ACoS Targets: Your ACoS needs to be comfortably below your break-even ACoS.
• Focus on High-Performing Campaigns: You might pause or reduce spend on campaigns that aren’t meeting your profit goals.
• Efficiency is Key: Every dollar spent on ads needs to contribute directly to profitable sales.

In this stage, a lower ACoS is the primary indicator of success. You’re not just looking at the number itself, but how it relates to your actual profit margin. If your profit margin is 30%, you want your ACoS to be consistently below that, perhaps in the 15-25% range, to ensure a healthy return on your advertising investment.

Understanding your ACoS (Advertising Cost of Sale) is key, no matter where your campaign is in its journey. Early on, a higher ACoS might be okay as you test the waters. As things progress, you’ll want to see that number drop. Want to learn how to manage your ACoS effectively through all stages? Visit our website for expert tips and strategies.

Wrapping It Up: ACoS Isn’t the Whole Story

So, we’ve talked a lot about ACoS, and how it’s basically a way to see how much you’re spending on ads compared to the sales those ads bring in. It’s easy to get caught up in trying to make that number as low as possible, but honestly, that’s often not the smartest move. Remember, a super low ACoS might mean you’re missing out on sales or not giving your products enough visibility to grow. Instead of fixating on just ACoS, think about your profit margins and your overall business goals. Sometimes, spending a bit more on ads, even if your ACoS goes up temporarily, can actually boost your organic sales and help your brand grow in the long run. Keep an eye on other numbers like TACoS and your actual profit, and you’ll have a much clearer picture of what’s really working for your Amazon business.

Frequently Asked Questions

What exactly is ACoS on Amazon?

ACoS stands for Advertising Cost of Sales. It’s like a report card for your Amazon ads. It tells you how much money you spent on ads compared to how much money those ads brought in. For example, if you spent $20 on ads and made $100 in sales because of those ads, your ACoS is 20%. It helps you see if your ads are making you money or costing you too much.

Is there a magic number for a ‘good’ ACoS?

Nope, there’s no single ‘magic number’ that works for everyone. Think of it like this: what’s a ‘good’ grade depends on the class. For Amazon, a ‘good’ ACoS depends on your product’s profit, what you’re trying to achieve with your ads (like selling more or just getting noticed), and what kind of products you sell. Some sellers might be happy with a 35% ACoS, while others need it to be below 15% to make a profit.

Why is a low ACoS not always the best thing?

Sometimes, sellers get too focused on making their ACoS super low. But if you cut your ad spending too much, your products might not be seen by enough people. This can hurt your overall sales, even if the ads you *do* run are cheap. It’s like trying to save money by not eating when you need energy to run a race – you might save money, but you won’t win. You need to find a balance that helps you make money and grow.

How do I know what ACoS is right for *my* business?

To figure out your own ‘good’ ACoS, you need to know how much profit you make on each sale after all your costs (like making the product, shipping, and Amazon’s fees). This is your profit margin. Your ACoS needs to be lower than your profit margin to actually make money from those ad sales. So, if your profit margin is 30%, you want your ACoS to be below 30%.

What other things should I look at besides ACoS?

ACoS is important, but it’s just one piece of the puzzle. You should also look at TACoS (Total Advertising Cost of Sales), which compares your ad spending to *all* your sales, not just the ones from ads. Also, check how many people see your ads (impressions), how many click them (CTR), and how many clicks turn into sales (conversion rate). Looking at all these numbers gives you a much clearer picture of how your business is doing.

How can I make my ACoS better?

To improve your ACoS, focus on making your ads and product pages better. Make sure your ads are shown to the right customers by using good keywords. Improve your product descriptions, photos, and titles so people are more likely to buy when they click. Also, check your prices to make sure they are competitive. Sometimes, just making small changes to these things can make a big difference in how much you spend and how much you earn.