The two formulas
ACoS = ad spend ÷ ad sales
TACoS = ad spend ÷ total sales (ad sales + organic sales)
Ad sales are the sales the ad platform attributes to a click on an ad, within its attribution window. Organic sales are everything else. Because total sales are always at least as large as ad sales, TACoS is always the smaller number. In March, $4,200 of ad spend bought $14,000 of ad sales (ACoS 30.0%) in a month with $42,000 of total sales (TACoS 10.0%).
ACoS and ROAS are the same ratio upside down
ROAS = ad sales ÷ ad spend = 1 ÷ ACoS. An ACoS of 30% is a ROAS of 3.33, meaning $3.33 of ad sales per $1 of ads. Marketplace ad consoles tend to show ACoS, while social and search platforms tend to show ROAS, so it helps to convert quickly. Neither one is a profit measure on its own, as explained in ROAS vs ROI.
Worked example: ACoS, TACoS and break-even ACoS
Inputs in yellow. Rows 2 to 9 compare two months of one product line, rows 12 to 22 work out the break-even and target ACoS for one unit.
| A | B | C | |
|---|---|---|---|
| 1 | One product line | March | April |
| 2 | Ad spend | 4,200.00 | 4,600.00 |
| 3 | Ad sales (attributed to ads) | 14,000.00 | 14,375.00 |
| 4 | Organic sales | 28,000.00 | 35,625.00 |
| 5 | Total sales | 42,000.00 | 50,000.00 |
| 6 | ACoS = ad spend ÷ ad sales | 30.0% | 32.0% |
| 7 | ROAS = ad sales ÷ ad spend | 3.33x | 3.13x |
| 8 | TACoS = ad spend ÷ total sales | 10.0% | 9.2% |
| 9 | Organic share of sales | 67% | 71% |
| 10 | |||
| 11 | Break-even ACoS, one unit | Value | |
| 12 | Selling price | 29.99 | |
| 13 | Landed cost per unit | 7.40 | |
| 14 | Referral fee rate (illustrative) | 15% | |
| 15 | Referral fee | 4.50 | |
| 16 | Fulfilment fee (illustrative) | 5.10 | |
| 17 | Profit per unit before ads | 12.99 | |
| 18 | Break-even ACoS | 43.3% | |
| 19 | Margin to keep on ad sales | 10% | |
| 20 | Target ACoS | 33.3% | |
| 21 | Max ad cost per ad sale | 9.99 | |
| 22 | April verdict | OK |
- C6
=C2/C3ACoS: ad spend ÷ ad sales - C8
=C2/C5TACoS: ad spend ÷ total sales - B18
=B17/B12Break-even ACoS: profit before ads ÷ price - B22
=IF(C6>B18,"Loss",IF(C6>B20,"Thin","OK"))Verdict for April's ACoS
Independent guide, not affiliated with Amazon, Etsy, eBay or any marketplace. Fee rates are illustrative. All figures are fictional.
What is a good ACoS? Start from the break-even ACoS
A good ACoS depends on your margin, not on an industry average. The break-even ACoS is the profit per unit before advertising divided by the price: at that ACoS, the ads eat the whole profit of each ad sale.
A unit sells for $29.99. After the landed cost of $7.40, a 15% referral fee ($4.50) and a fulfilment fee of $5.10, it earns $12.99 before ads. The break-even ACoS is 12.99 ÷ 29.99 = 43.3%. To keep a 10% margin on ad sales too, the target ACoS is 43.3% − 10% = 33.3%, which allows at most $9.99 of ad cost per ad sale. April's 32.0% is under the target, so the nested IF in the sheet returns "OK". The fees here are illustrative. Use your own fee report, and see markup vs margin if the margin maths is new.
Reading ACoS and TACoS together
From March to April, ad spend rose to $4,600 and ACoS got slightly worse, from 30.0% to 32.0%. Looking at ACoS alone, the campaigns got less efficient. But total sales grew from $42,000 to $50,000 and TACoS fell from 10.0% to 9.2%: organic sales grew faster than ad spend, often because ad sales improve sales rank and reviews. Rules of thumb:
- ACoS up, TACoS down: ads may be lifting organic sales. Usually fine during a launch or a push.
- ACoS down, TACoS up: campaigns look efficient, but organic sales are shrinking. Check rank, price and stock.
- Both rising: you are paying more for every sale. Cut bids on the weakest keywords.
Calculating ACoS by campaign type
Campaign reports come one row per campaign. Add up spend and sales per group with SUMIFS, for example =SUMIFS(spend,type,"Exact")/SUMIFS(sales,type,"Exact"), and calculate ACoS on the sums. Averaging the ACoS of each campaign gives a small campaign the same weight as a large one and is wrong. TACoS is not an official metric on every marketplace, and some sellers include only one product or only one channel, so define it once and track it consistently as a monthly trend.
Common mistakes
- Comparing ACoS with a generic benchmark. A 30% ACoS is a loss on a product with a 25% margin and a good result on one with 50%. Compare it with your break-even ACoS.
- Averaging campaign ACoS. Calculate ACoS on summed spend and summed sales, otherwise small campaigns distort the total.
- Judging ads by ACoS alone. Cutting ad spend can improve ACoS while organic sales fall. Track TACoS next to it.
- Forgetting fees in the break-even. Referral fees, fulfilment fees, storage and returns all come out of the profit per unit before you can spend it on ads.
- Mixing attribution windows. Ad sales reported with a 7-day and a 14-day window are not comparable. Use the same window for every month.
- Defining TACoS differently each month. Decide whether total sales include all channels and all products, then keep it that way.
Frequently asked questions
What is the difference between ACoS and TACoS?
Both divide ad spend by sales. ACoS uses only the sales attributed to ads, so it shows campaign efficiency. TACoS uses total sales including organic, so it shows how dependent the whole business is on advertising.
What is a good TACoS?
It depends on margin and the product's stage. Many sellers aim for a TACoS that is stable or falling over time. A rising TACoS with flat sales means you are buying an ever larger share of your revenue.
How do you calculate break-even ACoS?
Divide the profit per unit before advertising by the selling price. At that ACoS the ad cost uses up the whole profit of each ad sale. Subtract the margin you want to keep to get a target ACoS.
Is ACoS the same as ROAS?
They use the same two numbers turned upside down. ROAS is ad sales divided by ad spend, so ROAS equals 1 divided by ACoS: an ACoS of 25% is a ROAS of 4.