University - Amazon Advertising
Amazon PPC Advertising Cost of Sales (ACoS)
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Advertising cost of sales (ACoS) is a key metric for retailers and brands advertising on Amazon to track regularly. ACoS is the percentage of direct sales made from Sponsored Products ads, or the overall brand sales made from Sponsored Brands (formerly known as Headline Search Ads) that resulted from an advertising campaign. The metric is calculated by dividing total ad spend by total sales from advertising.
How to Calculate ACoS:
The formula for Amazon Sponsored Products ACos is below:
ACoS = total ad spend / total ad sales x 100
For example, if you spent $2.00 on advertising and those ads results in $20 worth of sales, your ACoS would be 10%. On Amazon, ACoS is used to help you measure how effective a campaign is relative to your advertising spend. A lower ACoS means that you are spending a lower percentage of sales on advertising.
With Sponsored Products campaigns, total sales consist of product sales generated within one week of clicks on your ads. This total includes both sales of the advertised item, as well as sales of the other SKUs in your inventory. For example, if a click on your ad for a blue shirt generates a sale for one of your red shirts, this is included in total sales.
With Sponsored Brands, total sales consist of the product sales generated by ad clicks in two weeks. This total includes sales of the advertised items, as well as sales of other products within the same brand that resulted from clicks on your ads, regardless of whether they were sold by you or by others. For example, if you sell athletic equipment, you may discover that your Sponsored Brand ad for your new running sneaker collection also generated sales for that brand’s socks and workout clothes sold by other advertisers.
ACoS factors into an Amazon advertising strategy because it can help determine the success of your advertising campaigns. It is important to note, however, that ACoS alone can not be used to measure profitability, as you will need to take the entire cost structure of the product being advertised into account.
What Is a Good Amazon PPC ACoS?
Your PPC advertising cost of sales (ACoS) will vary by the type of targeting that you choose for each campaign, as well as by your product category. If your goal is to minimize advertising spend, you will want to lower your ACoS. If your goal is to increase visibility for a new or existing SKU, you may be fine with a higher ACoS for a set period of time.