Amazon ACoS (Advertising Cost of Sale) is the ratio of ad spend to ad revenue, calculated as (ad spend / ad revenue) x 100. If you spend $25 on ads and generate $100 in ad-attributed revenue, your ACoS is 25%. A lower ACoS means you're spending less to generate each dollar of ad revenue, which sounds great until you realize that aggressively low ACoS often means you're leaving growth on the table.
ACoS is Amazon's native efficiency metric, and it's the number most sellers obsess over. But it's only half the picture. Without context (your profit margins, your growth goals, your organic sales ratio), a raw ACoS number is nearly meaningless.
Why Amazon ACoS Matters
Amazon advertising is pay-to-play for most product categories. Sponsored Products, Sponsored Brands, and Sponsored Display ads drive a significant share of Amazon sales, especially for newer products without established organic rankings.
ACoS matters because it directly determines whether your advertising is profitable. Here's the simple math:
- If your product sells for $40 and your total cost (product, shipping, Amazon fees) is $20, your pre-ad profit margin is $20 (50%).
- At a 25% ACoS, you're spending $10 per $40 sale on ads. Your net profit is $10 per unit. Advertising is profitable.
- At a 50% ACoS, you're spending $20 per $40 sale. Your net profit is $0. This is your break-even ACoS.
- At a 60% ACoS, you're spending $24 per $40 sale. You're losing $4 per unit sold through ads.
Your break-even ACoS equals your pre-ad profit margin percentage. Every brand should know this number before spending a dollar on Amazon ads.
How Amazon ACoS Works
The Formula
ACoS = (Ad Spend / Ad Revenue) x 100
Examples:
- $50 spend / $500 revenue = 10% ACoS (very efficient)
- $150 spend / $500 revenue = 30% ACoS (moderate)
- $300 spend / $500 revenue = 60% ACoS (inefficient for most categories)
What's a "Good" ACoS?
There's no universal answer. It depends on your margins, category, and goals. But here are benchmarks:
- Under 15% ACoS: Highly efficient. Typical for established brands with strong organic sales and loyal repeat buyers.
- 15-25% ACoS: Healthy range for most categories. Profitable for products with 40%+ margins.
- 25-40% ACoS: Acceptable during growth phases, new product launches, or competitive categories. May be unprofitable on a per-unit basis but drives ranking and review velocity.
- 40%+ ACoS: Typically unsustainable unless you have exceptionally high margins (luxury goods, subscription products with high LTV) or are deliberately investing in market share.
Break-Even ACoS Calculation
Break-Even ACoS = ((Sale Price - Total Cost) / Sale Price) x 100
For a product that sells at $30 with $18 in total costs (COGS + shipping + Amazon fees):
Break-Even ACoS = (($30 - $18) / $30) x 100 = 40%
Any ACoS below 40% generates profit on this product. Any ACoS above 40% loses money per sale. Know this number for every SKU you advertise.
ACoS vs. TACoS vs. ROAS: Complete Comparison
| Metric | Formula | What It Tells You | Best Used For |
|---|---|---|---|
| ACoS | (Ad Spend / Ad Revenue) x 100 | Efficiency of ad spend relative to ad-attributed revenue | Campaign-level optimization, bid management, keyword evaluation |
| TACoS | (Ad Spend / Total Revenue) x 100 | Ad spend as a percentage of ALL revenue (organic + paid) | Overall advertising health, organic vs. paid balance, long-term strategy |
| ROAS | Ad Revenue / Ad Spend | Revenue generated per dollar of ad spend | Cross-platform comparison (used by Google, Meta, TikTok), executive reporting |
Here's why TACoS matters more than ACoS for long-term health. Imagine two scenarios:
- Brand A: $10K ad spend, $40K ad revenue, $100K total revenue. ACoS = 25%. TACoS = 10%. Strong organic sales mean ads are supplementing, not carrying, the business.
- Brand B: $10K ad spend, $40K ad revenue, $45K total revenue. ACoS = 25%. TACoS = 22%. Almost all revenue is ad-dependent. If ads are paused, revenue collapses.
Same ACoS. Very different business health. TACoS reveals the dependency.
ACoS Optimization Strategies
Keyword-Level Optimization
Pull your search term report weekly. Identify terms that convert below your break-even ACoS and increase bids. Identify terms above break-even and reduce bids or add them as negative keywords. Move high-performing search terms from auto campaigns to exact match manual campaigns for tighter bid control.
Bid Strategy Alignment
Amazon offers three bid strategies: "fixed bids," "dynamic bids, down only," and "dynamic bids, up and down." Start with "down only" for cost control. Switch to "up and down" for high-converting campaigns where you want Amazon's AI to bid more aggressively in high-conversion-probability auctions.
Product Page Optimization
Your ACoS is only as good as your conversion rate. If your product listing converts at 10% instead of 15%, you need 50% more clicks (and 50% more ad spend) to generate the same number of sales. Optimizing your title, images, bullets, and A+ content often reduces ACoS more than any bid adjustment.
Dayparting
Analyze your conversion data by hour of day. If conversions cluster between 7-10 PM, consider increasing bids during those hours and reducing them during low-conversion periods (like 2-5 AM). Not all tools support this natively, but third-party bid managers can automate dayparting.
Portfolio-Level Management
Don't optimize each campaign in isolation. A Sponsored Brands campaign with a 40% ACoS might be acceptable if it drives branded searches that your Sponsored Products campaign then converts at 12% ACoS. Look at portfolio-level TACoS, not just individual campaign ACoS.
Common ACoS Mistakes
- Chasing the lowest possible ACoS. A 5% ACoS sounds amazing, but it usually means you're barely spending and missing most of the available demand. The goal isn't the lowest ACoS. The goal is the highest profitable revenue at an acceptable ACoS.
- Ignoring TACoS. If your ACoS is 20% but your TACoS is also 18%, your organic revenue is almost zero. You're entirely dependent on ads. Healthy businesses typically have TACoS of 5-15%, meaning organic sales significantly exceed paid sales.
- Not knowing your break-even ACoS. Too many sellers optimize ACoS by feel ("25% sounds good") instead of calculating their actual break-even point. Without this number, you're guessing at profitability.
- Using the same ACoS target for every product. A new product launch needs aggressive ACoS (30-50%) to build velocity and reviews. A mature product with strong organic ranking can run at lower ACoS (10-20%). Different goals require different targets.
- Reacting to daily ACoS fluctuations. ACoS varies significantly day-to-day due to attribution windows (Amazon uses a 7-day or 14-day click attribution window). Evaluate trends weekly or bi-weekly, not daily. Making bid changes based on a single bad day leads to constant overcorrection.
Example: Using Break-Even ACoS to Guide Growth
A supplement brand launched a new protein powder on Amazon with aggressive 45% ACoS targets to build velocity and reviews. After 90 days and 200+ reviews, they calculated their break-even ACoS at 32% (based on 68% gross margin after COGS and Amazon fees). They restructured their campaigns: moved proven keywords to exact match with 25% ACoS targets, kept discovery campaigns running at 35% ACoS, and negated every term that spent more than 2x CPA without converting. Within 60 days, blended ACoS dropped from 42% to 26%, well below the 30.4% average ACoS across all Amazon categories (Ad Badger 2025). More importantly, organic sales grew from 30% to 55% of total revenue, dropping TACoS from 18% to 11%. The key insight: they didn't chase the lowest ACoS possible. They set targets relative to their actual margins and growth stage.
Frequently Asked Questions
What's the average ACoS on Amazon?
Category averages vary widely, from roughly 15% in lower-competition categories to 35%+ in competitive spaces like electronics. The overall Amazon average is approximately 20-30%. But averages are not helpful for your business. What matters is your break-even ACoS and your specific growth goals.
Should I prioritize ACoS or TACoS?
Use ACoS for campaign-level decisions (which keywords to bid on, which ads to pause). Use TACoS for business-level decisions (is my advertising strategy healthy overall, am I building organic presence, am I too dependent on ads). Both matter, but TACoS gives you the bigger picture.
Why is my ACoS high on new product launches?
New products have no sales history, no reviews, and low conversion rates. All three factors increase ACoS. High launch ACoS is normal and expected. Focus on building review velocity and optimizing your listing. As reviews accumulate and conversion rates improve, ACoS will naturally decrease. Plan for 2-3 months of above-target ACoS during launches.
How does ACoS relate to ROAS?
They're inverses. ROAS = 1 / (ACoS / 100). So a 25% ACoS equals a 4x ROAS. A 50% ACoS equals a 2x ROAS. Amazon uses ACoS natively. Google, Meta, and most other platforms use ROAS. When comparing performance across platforms, convert to the same metric.
Is it possible to have too low of an ACoS?
Yes. An extremely low ACoS (under 10%) usually indicates you're only bidding on branded terms or very long-tail keywords with minimal competition. You're likely missing the majority of potential customers who search broader terms. The opportunity cost of an overly conservative ACoS target is invisible in your reports but real in your revenue.
ACoS is just one number in a complex equation. The brands that grow profitably on Amazon are the ones who understand how ACoS connects to TACoS, organic ranking, listing quality, and overall business strategy. Texin.ai brings that full-picture approach to Amazon advertising and digital shelf optimization. Reach out for a free ACoS and listing audit.