If you advertise on Amazon, ACoS is probably the number you look at first and argue about most. It's prominent in the console, it's easy to understand, and it's the metric every "Amazon PPC expert" leads with. It's also, on its own, a fairly poor guide to whether your advertising is working.

This article explains what ACoS and TACoS each measure, why optimising hard for ACoS can shrink the business you're trying to grow, and how to decide which number should be driving your decisions depending on where each product is in its life.

The definitions, quickly

ACoS - Advertising Cost of Sales - is ad spend divided by the sales that Amazon attributes to those ads. Spend £1,000, get £5,000 of attributed sales, ACoS is 20%. It's the inverse of ROAS: 20% ACoS is a 5x ROAS.

TACoS - Total Advertising Cost of Sales - is ad spend divided by total sales for the product or account, organic and paid combined. Spend the same £1,000, but the product does £20,000 in total, and TACoS is 5%.

ACoS tells you how efficient the ads are in isolation. TACoS tells you how heavily the business depends on advertising to generate its sales. They answer different questions, and they often move in opposite directions.

Why ACoS alone is misleading on Amazon

On Amazon, advertising and organic performance are tangled together in a way they aren't on Google. Ad-driven sales improve sales velocity, which improves organic rank, which drives organic sales that never appear in your ad reports. Cut ad spend to improve ACoS and you can quietly lose the organic rank the ads were supporting. ACoS looks better; total sales fall; profit falls with them.

ACoS also has a measurement problem. Attribution windows, brand halo (someone clicks an ad for product A and buys product B), and the growing share of sales Amazon credits to ads all mean the number is softer than its two decimal places suggest.

And it ignores margin entirely. A 25% ACoS is excellent on a product with a 60% margin and ruinous on one with a 20% margin. "Good ACoS" doesn't exist in the abstract.

Break-even ACoS: the number you actually need first

Before setting any target, work out your break-even ACoS per product: the contribution margin after Amazon fees, fulfilment, cost of goods and returns, expressed as a percentage of selling price. If a product sells for £40 and after everything you keep £12, your break-even ACoS is 30%. Any ACoS below that is profitable on a per-order basis; above it, each ad-driven sale loses money unless you're deliberately investing.

Most accounts I look at have never done this calculation per product. They run one account-wide ACoS target that's too tight for some products and too loose for others. If you take one thing from this article, build that spreadsheet.

When to optimise for ACoS

  • Mature products with stable organic rank, where ads are a profit lever rather than a growth lever
  • Low-margin products where every sale needs to pay for itself
  • Defensive brand campaigns, where the job is to protect your listing from competitors at the lowest cost
  • When cash flow is tight and you can't afford to invest ahead of return

Here, a target ACoS comfortably below break-even is the right goal, and you should be ruthless about search terms and placements that don't hit it.

When to optimise for TACoS

  • New product launches, where the goal is velocity, reviews and rank - and ACoS will be ugly for a while by design
  • Products with real organic upside, where paid sales lift the listing's overall position
  • Category expansion, where you're deliberately buying visibility you don't yet have organically
  • Any situation where you're judging the business, not just the campaigns

A falling TACoS alongside rising total sales is the healthiest pattern there is: the business is growing and becoming less dependent on ads to do it. A rising TACoS with flat sales is a warning - you're paying more for the same result, usually because organic has slipped or competition has intensified.

Setting targets by product lifecycle

A practical way to run it is to group products by stage and set the metric accordingly:

  • Launch (first 60-90 days): accept ACoS above break-even. Watch TACoS and organic rank. Budget is an investment with a defined end date.
  • Growth: target ACoS around break-even, with TACoS trending down. Push spend where incremental sales are still cheap.
  • Mature: target ACoS well below break-even, use TACoS to confirm you're not starving organic, and shift budget towards newer products.
  • Declining or clearance: ACoS only. Sell through efficiently and don't chase rank you won't keep.

Review the grouping quarterly. Products move between stages, and a target that was right in March is wrong by September.

Other numbers worth having beside them

  • Organic versus paid sales split per product - the direct read on whether ads are building rank or replacing it
  • New-to-brand metrics in Sponsored Brands and DSP - whether you're acquiring customers or re-selling to existing ones
  • Conversion rate by placement - top of search versus product pages often behave very differently
  • Profit per unit after ad spend - the number that actually matters, and the one the console won't show you

The honest summary

ACoS is the efficiency of a campaign. TACoS is the health of a product. Run campaigns on ACoS, run the business on TACoS, and never set either target without knowing your margin first. Brands that get this right stop having the monthly "ACoS went up" panic and start having a more useful conversation about which products deserve investment and which are done.

If you'd like a second opinion on your targets - or a sanity check on whether the ads are actually making money - that's the sort of thing I do under Amazon Ads management, and I'm happy to talk it through.

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