ACoS — or Advertising Cost of Sale — is the metric that most Amazon advertisers and sellers care about. But you might be wondering about ACoS vs. TACoS vs. ROAS, and which one is best for your brand to monitor.
What is the difference between these three metrics? When should each be used? Is one better than the other? Read on to find out.
ACoS vs. TACoS vs. ROAS
ACoS tracks the impact of your ad spend on your ad sales on Amazon. ROAS is the reverse of ACoS, similarly indicating how your ad spend impacts your revenue. TACoS provides the full picture of your Amazon efforts, dividing ad spend by total sales.
What is ACoS?
Amazon ACoS is a metric for tracking how much money you make from advertising. The formula to calculate ACoS is:
Ad Spend ÷ Ad Sales
So, ACoS reflects how your ad spend directly impacted your sales — or, for every dollar of money you spent on advertising, how many dollars you made in sales.
A 100% ACoS would mean you are breaking even between your ad spend and sales. Anything less than 100% means you are still making a profit; anything more means you are spending more on advertising than you are earning in sales.
Why ACoS Is Important
ACoS is important at a campaign level, as you’ll likely have different target ACoS for branded vs. non-branded campaigns. Branded campaigns will have a higher ACoS because you are buying new customers, while non-branded campaigns will have a lower ACoS because there is lower competition and higher intent.
ACoS is specific to ad performance only — for example, if you spent 20K and drove 100K in ad sales, you were running at 20% ACOS. But, the downside of ACoS is that it’s only telling the story of advertising and the sales resulting from those ads, not your total sales.
What is TACoS?
TACoS is the whole picture of your Amazon business. Whereas ACoS only tracks the results of your advertising efforts, TACoS takes all of sales into account — regardless of whether they came directly from advertising or not. To calculate TACoS, use this formula:
Ad Spend ÷ Total Sales
Why TACOS Is Important
TACoS tells the entire story of your Amazon business — in essence, it’s your total advertising cost of sale. TACoS is key to focus on, and you want to make sure it is aligned with your overall performance.
Your advertising might be driving higher ACoS, but your overall TACoS is low because you’ve had great success with organic search conversions. You might have a 39% ACoS and a 20% TACoS because of how your advertising performs within the holistic view of your account performance. Advertising on Amazon is non-negotiable, but you can have sales that come from outside of it.
What is ROAS?
ROAS, short for return on ad spend, is again focused on advertising, not overall performance. ROAS is essentially the reverse of ACoS—dividing what you made by what you spent, instead of vice versa.
Ad Revenue ÷ Ad Spend
ROAS is still used in reporting on Amazon, as it is a familiar metric to many in the digital advertising world. Like ACoS, it focuses on the results of your advertising, but ROAS indicates how much money you made for every dollar you spent on advertising. It is the inverse of ACoS, which indicates spend.
Why ROAS is Important
ROAS is an important metric as it indicates the success of a specific advertising campaign. Different types of campaigns will have different target ROAS—retargeting campaigns should have a high ROAS (but low ACoS), and prospecting (or new customer acquisition) campaigns will have a low ROAS (but high ACoS).
Should I Use ACoS, TACoS, or ROAS?
The answer is more complicated than just personal preference or what your CEO wants to see. In general, ACoS and ROAS should be used to monitor individual campaigns, and TACoS should be used to measure the holistic performance of your Amazon brand. Feel free to monitor and use all three metrics in your reporting to give a full picture of your brand from individual campaigns to your overall sales!
Need help navigating the confusing world of Amazon metrics? The Marketplaces Team at Blue Wheel is here to help.