ACoS — Advertising Cost of Sale — is the metric that tells you how efficient your Amazon advertising is. Understanding what your ACoS should be and how to improve it is fundamental to profitable PPC management.
What ACoS Means
ACoS is calculated as: (Ad Spend / Ad Revenue) x 100. If you spent £20 on ads and generated £100 in sales from those ads, your ACoS is 20%. In simple terms, you spent 20p in advertising for every £1 of revenue those ads produced.
What Is a Good ACoS?
There is no universal "good" ACoS — it depends entirely on your profit margins. If your pre-advertising profit margin is 35%, then an ACoS under 35% means your ads are generating profit. An ACoS above 35% means you are spending more on advertising than you are making in profit from those ad-driven sales.
Your break-even ACoS equals your profit margin before advertising. Everything below that is profitable. Everything above it is a loss — though sometimes running at a loss temporarily is strategic (more on that below).
When a High ACoS Is Acceptable
For new product launches, running a high ACoS (even above break-even) is a common strategy. The advertising drives sales velocity, which improves organic ranking, which eventually generates organic sales that do not cost you advertising money. Once organic ranking is established, you can reduce ad spend and your overall profitability improves.
Think of it as investing in visibility. The short-term advertising loss is offset by the long-term gain in organic sales. This strategy requires patience and enough capital to fund the advertising period.
Strategies to Reduce ACoS
Improve your listing conversion rate. If more people who click your ad actually buy your product, your ACoS drops because you are generating more revenue per click. Better images, a more compelling title, stronger bullet points, competitive pricing, and more reviews all improve conversion.
Refine your keyword targeting. Negate keywords that generate clicks but not sales. These are pure waste. Use your Search Term Report to identify non-converting terms and add them as negative keywords.
Lower bids on underperforming keywords. If a keyword has a high ACoS, reduce your bid. You will get fewer clicks but each click costs less, bringing the ACoS down. Find the bid level where the keyword is profitable.
Focus on exact match keywords. Exact match gives you the most control and typically produces the lowest ACoS because you are targeting precise, high-intent searches.
Use dayparting if available. Some sellers find that certain times of day produce better conversion rates. Concentrating your budget during high-converting hours improves efficiency.
TACoS — The Bigger Picture
While ACoS measures advertising efficiency in isolation, TACoS (Total Advertising Cost of Sale) measures your ad spend as a percentage of your total revenue (organic plus advertising). TACoS gives you a better picture of your overall business efficiency.
A healthy business shows ACoS that may be moderate, but TACoS that is low and declining — meaning a growing proportion of your sales are organic (free) rather than ad-driven (paid).
ACoS management is an ongoing discipline, not a one-time task. Regular optimisation — weekly bid adjustments, keyword harvesting, and negative keyword additions — compounds into progressively more efficient advertising over time.