What is ACoS? What is TACoS? What’s the difference between these two metrics? Will I ever find love?
In this article, we’ll cover all of that and more (except that last one, not sure how that slipped in there).
What’s the Difference Between ACoS and TACoS?
Both of these metrics measure the relationship between your ad spend and your revenue. However, there is one distinct difference.
First, some quick definitions.
ACoS: ACoS stands for Advertising Cost of Sales. It measures your ad spend in relation to your ad revenue. The way to calculate it is: Ad Spend Ad Revenue.
TACoS: TACoS stands for Total Advertising Cost of Sales. It measures your ad spend in relation to your total revenue. The way to calculate it is: Ad Spend Total Revenue.
As you probably noticed, ACoS is only taking into account the revenue generated from your ads. Whereas TACoS measures your ad revenue plus your organic revenue.
That’s the main difference between the two.
Which Metric Should I Use?
Why not both?
Both of these metrics are important and can offer different insights into your advertising campaigns and your business. In fact, we believe that by understanding and utilizing both metrics you’re getting a much more comprehensive view of your PPC marketing efforts.
First, let’s quickly summarize what these two metrics can show you.
One important thing to understand is that investing in paid advertising can help grow your organic sales over time. TACoS can help you to realize this strategy.
TACoS can help you to understand:
your overall profitability
your reliance on advertising
the effect of your ad sales on organic sales
ACoS, on the other hand, is focused specifically on how your ad spend is performing in a given period of time.
ACoS can help you to understand:
how your campaigns, ad group or keywords are performing
how to optimize your bids for profitability (breakeven ACoS)
How Do I Know if My ACoS and TACoS Are Good or Bad?
We say this a lot but it really all depends on your goals.
So, what would make an ACoS “bad”?
Lots of people might tell you that “you should keep your ACoS low” but we would suggest that should be changed to “you should keep your ACoS on target”.
Your ACoS might not be on target if you’ve exceeded your breakeven ACoS (which means your ads are eating up your profit margins) or you’re not meeting your ACoS goals.
While a high ACoS does typically mean that you’re spending more on advertising you might have a very good reason to do that (like a product launch). Also, sometimes you simply need to spend money to make money.
So, while a low ACoS can be great for profitability, a high ACoS can increase visibility, increase market share, and potentially lead to more profit in the long run.
This is where TACoS comes in!
The same basic rule applies. Your TACoS is “bad” if it’s not on target. Meaning if your ad spend is cutting into your profitability or you’re not hitting your goals then you should re-evaluate your campaigns.
The main rule of thumb is If TACoS < organic profit margin, then your overall business is profitable after advertising. That’s good!
That being said, decreasing or increasing TACoS can indicate certain trends in your advertising that you should be aware of.
TACoS Is Decreasing
This typically means that your advertising is becoming more profitable. Some reasons for that might be:
Your ad spend and sales are going up but your ad spend is increasing at a lower rate.
Your total sales are staying the same and your ad spend is going down.
Your total sales are increasing but your ad spend didn’t change.
TACoS Is Increasing
This is usually an indicator that your advertising is becoming less profitable. Some reasons for that might be:
You’re spending more on ads but there’s no change in your total sales.
Your ad spend and total sales are increasing but sales are not high enough to offset your spending.
You’re spending the same amount on ads but your total sales are declining.
How do you use TACoS and ACoS when interpreting your ad campaigns?
Did anything in this article spark your curiosity or bring up a question? Comment below or email us at [email protected] We love talking about PPC!
2 thoughts on “What Are ACoS and TACoS in Amazon Advertising and How to Interpret Them”
Thanks for your blog, nice to read. Do not stop.
Hey Mark! It’s great to hear that you like the blog. If you’d like to chat with us more about PPC or anything related to selling on Amazon we’d love to hear from you. Just shoot us an email at [email protected].
Thanks again for your support!
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