Module 07: ACoS vs TACoS on Amazon, and advertising basics
ACoS vs TACoS on Amazon is the difference between judging one ad and judging the whole business.
ACoS is ad spend divided by ad sales; TACoS is ad spend divided by total sales, ad and organic. Keep ACoS under your break-even and watch TACoS fall as organic sales grow.
Amazon says "There isn't a definitive number for a good Amazon ACOS" (Amazon Ads, ACOS guide). Your good number comes from your own margin, which you worked out in module 02. This module turns that into a target, shows how ACoS and TACoS move over a product's first three months and gives you a weekly routine for Sponsored Products.
How does Amazon define ACoS?
As a ratio of ad spend to ad sales: "ACOS = (ad spend ÷ ad revenue) x 100." Spend $50 to earn $100 in ad sales and ACoS is 50%. ROAS is the inverse, ad revenue divided by ad spend: the same campaign has a ROAS of 2 (Amazon Ads, ACOS guide).
Amazon ties the target to margin: to stay profitable, ACOS must be lower than your profit margin, and Amazon suggests finding your break-even first (Amazon Ads, ACOS guide).
What is your break-even ACoS, and what should your target be?
Break-even ACoS is the ACoS at which an ad sale earns nothing after costs: contribution margin before ads, divided by price, times 100. From module 02's illustrative example: $12.11 ÷ $29.99 = 40.4%. Above that, each ad-driven sale loses money (Illustrative · sample figures).
Your target ACoS sits below break-even by the margin you want each ad sale to keep. If you want ad sales to keep about 15 points of margin, your target in that example is about 25%. A launch can run above target for a set time and budget; a mature product should not.
| ACoS compared with your numbers | What it means |
|---|---|
| Below target | Ad sales add margin; room to scale converting terms |
| Between target and break-even | Ad sales add little; fine for launch or rank defense |
| Above break-even | Each ad sale loses money |
ACoS vs TACoS on Amazon: what does TACoS add?
The whole-business view. TACoS (total advertising cost of sales) is ad spend divided by total sales, ad plus organic, times 100. It is an industry measure, not an Amazon metric, and Amazon's ACOS guide does not use it.
If ads help a listing rank and sell organically, TACoS falls as total sales rise, even when ACoS stays flat. If TACoS climbs while total sales stay flat, you are buying sales rather than building them.
| You see | It usually means | Do this |
|---|---|---|
| ACoS above break-even, TACoS rising | Ads lose money and do not lift organic sales | Cut non-converting search terms; lower bids |
| ACoS above break-even, TACoS falling | Launch phase: ads are building rank | Set a time and budget limit for the launch |
| ACoS below break-even, TACoS steady | Healthy | Scale converting terms carefully |
| ACoS below break-even, TACoS rising | Ads are taking credit for sales that would have come anyway | Check branded and defensive terms; trim overlap |
Worked example: a product's first three months
Illustrative · sample figures; not a forecast. Break-even ACoS 40.4%, target about 25%.
| Month | Ad spend | Ad sales | Total sales | ACoS | TACoS |
|---|---|---|---|---|---|
| 1 (launch) | $1,200 | $2,400 | $3,000 | 50.0% | 40.0% |
| 2 | $1,100 | $2,750 | $4,400 | 40.0% | 25.0% |
| 3 | $1,000 | $2,860 | $5,500 | 35.0% | 18.2% |
Month 1 loses money on ad sales, and that was planned: launch ads buy the first reviews and rank. By month 3, ACoS is under break-even but still above target, while TACoS has more than halved because organic sales grew. The next job is to move ACoS toward 25% by cutting terms that spend without converting, not to cut the budget across the board. Amazon notes that "new campaigns tend to have a high ACOS, merely because of their newness" (Amazon Ads, ACOS guide).
How do Sponsored Products work?
Sponsored Products are cost-per-click ads for individual products. There are no monthly or upfront fees; you set a maximum bid per click and a daily budget, which Amazon averages over the calendar month. They are open to Professional sellers, and the product must be in an eligible category and qualify for the Featured Offer. Adult, used and refurbished products are excluded (Amazon Ads, Sponsored Products).
Ads appear at the top of, alongside and within shopping results and on product detail pages. You can target three ways: automatic (Amazon picks relevant keywords), keyword (you choose them) or product (you choose products to appear against).
New-to-Amazon Professional sellers can get Sponsored Products credits of $50, $200 or $1,000 after matching spend, for a campaign created within 90 days of listing and used within 30 days of launch (Sell on Amazon, New Seller Incentives).
A first campaign setup that stays readable
- 01One automatic campaign
per product to discover the terms shoppers use.
- 02One manual exact-match campaign
for terms that have already converted.
- 03One product-targeting campaign
for close competitors where your offer compares well on price and reviews.
- 04Budgets you can afford to learn with,
set per campaign so one does not starve the others.
- 05Names that say what each campaign is,
so anyone can read the account in a year.
Because Sponsored Products need the Featured Offer, ads stop when you lose it or run out of stock. Fix that first (module 08).
A weekly routine, step by step
- 01Pull the search term report
from Campaign Manager's sponsored ads reports.
- 02Move terms that converted
into the exact-match campaign.
- 03Add terms that spent without converting
as negatives, after enough clicks to judge.
- 04Compare each SKU's ACoS with its break-even and target.
- 05Check TACoS
for the account and your top 10 SKUs.
- 06Change bids in small steps,
one variable at a time, and note what you changed.
Common mistakes
-
Judging ads on sales alone.
Sales up and margin down is the pattern this module exists to catch.
-
Copying someone else's "good ACoS".
Theirs comes from their margin, not yours.
-
Running ads on out-of-stock or non-featured offers.
The ads stop, and the budget plan breaks.
-
Changing bids, budgets and targeting on the same day.
You cannot tell which change worked.
-
No end date on a launch.
A launch with no limit becomes a permanent loss.
Key takeaways
- ACoS = ad spend ÷ ad sales × 100; there is no universal good number.
- Your break-even ACoS comes from your margin; your target sits below it.
- TACoS shows whether ads build the whole business.
- Fix stock and the Featured Offer before you spend.
Do this now
- Write the break-even and target ACoS for your top 5 SKUs.
- Calculate last month's TACoS.
- Add negatives for terms that spent without converting.
- Put the weekly routine on a fixed day.
- Give every launch campaign an end date and a budget cap.
Watch and practice
- Video: When do good ads lose money? The ROAS trap explained (100 seconds). Characters are fictional. Voices are AI-generated.
- Tools: the Amazon Ads console, your module 02 margin sheet and our fee and margin calculator. More on growing a running store: Scale on Amazon.
1:40
Read the transcript Captions are on screen Characters are fictional. Voices are AI-generated.
Problem and fix
"Our agency runs ads, but nobody runs operations." Cause: ads judged on sales, not margin, with stockouts and lost Featured Offers switching ads off. Fix: break-even ACoS per SKU, a TACoS trend and stock checked before budget changes. Service: Amazon PPC management at a flat $299 a month up to $5,000 of spend or $599 up to $20,000, never a percent of spend. Measure: share of ad spend on SKUs above break-even.
Want a second pair of eyes on your ads?
Book 30 minutes with an ops lead and bring last month's search term report and your break-even sheet. Selling $1M+ a year? The free Profit Leak Scan shows where ad spend and fees cost you margin. Back to the Amazon guide.
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What is a good ACoS on Amazon?
Amazon says there is no definitive number (Amazon Ads, ACOS guide). Yours is good if it stays below your target, which sits under your break-even ACoS. For a product with a 40% break-even, 25% might be a sensible target; for one with a 20% break-even, 25% loses money.
What is the difference between ACoS and TACoS?
ACoS divides ad spend by ad sales and judges the ads. TACoS divides ad spend by total sales, ad and organic, and judges whether ads build the business. ACoS is Amazon's metric; TACoS is an industry measure you calculate yourself from Campaign Manager and Business Reports.
How do I calculate break-even ACoS?
Contribution margin before ads, divided by price, times 100. With module 02's illustrative numbers that is $12.11 ÷ $29.99 = 40.4%. Above it, each ad sale loses money.
What is a good TACoS?
There is no single figure. What matters is the trend: falling or steady TACoS while total sales grow means ads are helping organic sales. Rising TACoS with flat sales means you are paying for sales you are not keeping.
Do Sponsored Products have a monthly fee?
No. There are no monthly or upfront fees; you pay per click up to the bids and daily budgets you set (Amazon Ads, Sponsored Products). The daily budget is averaged over the month, so some days can spend more than the daily figure.
Why is my ACoS high at launch?
Amazon notes that "new campaigns tend to have a high ACOS, merely because of their newness" (Amazon Ads, ACOS guide). The product has few reviews and little sales history, so clicks convert less. Set a time and budget limit for the launch and judge it on TACoS as well as ACoS.
Should ad management be priced as a percent of my spend?
We think not, because a percent of spend rewards spending more. Our ad management is a flat monthly fee, never a percent of spend, and every SKU is judged against its own break-even ACoS.
Sources3 sourcesLast checked Oct 20, 2026
- 01advertising.amazon.comchecked Oct 20, 2026Primary
- 02advertising.amazon.comchecked Oct 20, 2026Primary
- 03sell.amazon.comchecked Oct 20, 2026Primary
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