What Is ACOS on Amazon in 2026 and Why Should You Care?

Hey there! If you sell products on Amazon, I want to let you in on a metric that most sellers don‘t pay enough attention to – ACOS.

ACOS stands for Advertising Cost of Sale and it shows how much you‘re spending to generate sales from your Sponsored Product ads. I‘ll explain more in a minute, but essentially a lower ACOS equals higher profitability.

So if you want to maximize your profits with Amazon advertising, you need to understand what goes into this calculation and how it impacts your bottom line.

By the end of this guide, you‘ll be a pro at tracking, analyzing, and optimizing your Amazon ACOS like an expert! Let‘s dive in…

What Exactly is Amazon ACOS?

ACOS measures how much it costs you in advertising to generate a dollar in revenue. It is calculated by dividing your total advertising spend by your total revenue generated from ads.

For example, if you spent $100 on Sponsored Product ads last month and earned $500 in revenue from those ads, your ACOS would be:

ACOS = ($100 Ad Spend / $500 Revenue) x 100 = 20%

• Your ACOS is 20%
• For every $1 generated in revenue, you spent $0.20 in advertising

As you can see, ACOS shows your advertising efficiency as a percentage. The lower the ACOS, the more revenue you are generating per dollar of ad spend.

Make sense so far? Let’s look at some more examples to drive the point home:

• Scenario 1:

  • $200 ad spend
  • $1000 revenue
  • ACOS = ($200/$1000) x 100 = 20%

• Scenario 2:

  • $200 ad spend
  • $500 revenue
  • ACOS = ($200/$500) x 100 = 40%

• Scenario 3:

  • $100 ad spend
  • $300 revenue
  • ACOS = ($100/$300) x 100 = 33%

In which scenario is advertising generating the greatest return? Scenario 1, because it has the lowest ACOS percentage at 20%.

The seller in Scenario 1 is earning $5 in sales for every $1 spent on advertising. The other two sellers have less efficient ad spend with higher ACOS percentages.

Now you can see why closely monitoring ACOS is so important – it reveals precisely how profitable your Sponsored Product campaigns are.

How to Calculate Your Overall ACOS Percentage

Figuring out your current overall ACOS percentage is vital for understanding the performance of your Amazon advertising. Here‘s how to calculate it in two easy steps:

Step 1: Determine Your Total Ad Spend

Head to Seller Central and navigate to Advertising > Campaign Manager to locate your total advertising spend over a set time period.

You can view data for the past 7, 30, 60, or 90 days. I recommend looking at least 60 days to get a stable average.

For example, let‘s say your total ad spend for the past 60 days was $5000.

Step 2: Determine Your Total Advertising Revenue

Still in Seller Central, go to Reports > Business Reports and select the monthly Revenue report.

Dig into the Advertising section to find your total advertising driven revenue. Extract the data for the same 60 day period.

Let‘s imagine your ad revenue for those 60 days was $25,000.

Step 3: Calculate ACOS

Now you have the two key numbers you need to calculate overall ACOS:

• Total Ad Spend: $5000
• Total Ad Revenue: $25,000

Plug them into the formula:

ACOS = ($5000 / $25,000) x 100 = 20%

There you have it! Your current overall ACOS is 20%. For every $1 you spent on advertising, you generated around $5 in sales.

Calculating your aggregate ACOS regularly lets you quickly size up your advertising efficiency over time. But you can also dive deeper…

How to Calculate ACOS for Individual Campaigns

While your overall ACOS average is useful, analyzing ACOS for specific campaigns provides more actionable data.

You can pinpoint your best and worst performing ads to shift budget accordingly. Here‘s how to calculate ACOS for individual campaigns:

Step 1: Extract Campaign Spend

Head back to Advertising > Campaign Manager within Seller Central.

Locate the campaign you want to analyze and view the "Spend" column for total ad expenditures.

For example, let‘s say your "Product Launch" campaign spent $350 over the past month.

Step 2: Extract Campaign Revenue

Under the "Reports" section, click into your campaign. Select "View report‘ to see performance data.

Under the Sales tab, you‘ll find revenue directly attributed to this campaign for the selected date range.

Let‘s use $2000 in revenue for the "Product Launch" campaign last month.

Step 3: Calculate ACOS

Use those two figures to calculate ACOS for just the "Product Launch" campaign:

ACOS = ($350 Spend / $2000 Revenue) x 100 = 17.5%

The ACOS for this specific campaign is 17.5%, lower than your overall average. Campaign-level ACOS lets you identify your most and least efficient ads.

Now that you know how to extract ACOS data, let’s look at what benchmarks to aim for.

What is Considered a “Good” ACOS Percentage?

Is there an ideal ACOS percentage? What range should you aim for?

The answer depends on factors like:

• Your profit margins
• Competitiveness of your niche
• Your advertising goals

Here are some general ACOS benchmarks for Sponsored Product campaigns:

• Under 20% – Excellent ACOS indicating highly profitable ad spend
• 20-30% – Very good ACOS, likely profitable for most businesses
• 30-40% – Fair ACOS but may need optimization
• Over 40% – High ACOS, ads likely unprofitable

For example, products with 50% profit margins can maintain profitable ads at a higher ACOS than products with just 20% margins.

A good starting goal is aiming for ACOS under 30%. Then adjust based on your specific profitability needs.

Use your ACOS target to evaluate performance:

• ACOS above goal = underperforming campaign
• ACOS below goal = well-optimized campaign

Now let’s move on to the factors impacting your ACOS so you can start optimizing…

7 Key Factors That Influence Your Amazon ACOS

Many variables affect your ACOS performance. Being aware of these factors allows you to diagnose the reasons behind ACOS fluctuations and improve your advertising efficiency.

1. Keyword Targeting

The keywords and search terms you target impact ACOS more than any other factor.

Bidding on highly commercial keywords closely matching your products results in lower ACOS. Targeting broad, low search volume keywords will raise your ACOS.

Why? More relevant traffic converts at higher rates. Make sure your keyword list targets only buyers actively searching for products like yours.

2. Bid Amount

Higher bids help you rank higher in search results and get more impressions. But unreasonable high bids lead to inflated ACOS.

Finding the optimal bid for each keyword – high enough to rank well but low enough to maintain reasonable CPC – is crucial to lowering ACOS.

3. Quality Score

Amazon assigns a Quality Score (1-10) to your keywords based on expected CTR and conversion rate. Higher quality scores lead to lower minimum bids and better ad positioning.

keywords with low quality scores have inflated ACOS. Improve listings and increase relevance to boost quality scores.

4. Click Through Rate (CTR)

CTR measures how often your Sponsored Product ads are clicked when shown. Higher CTR lowers your ACOS.

Relevant, enticing ads placed prominently in search results attract more clicks and conversions, improving advertising efficiency.

5. Conversion Rate

Your conversion rate is the % of clicks that result in a sale. Improving conversion rate with compelling listings and clear pricing lowers ACOS.

6. Profit Margin

Products with higher profit margins can maintain reasonable ACOS levels more easily. Items with lower margins rely on ultra-low ACOS to stay profitable.

Factor your profitability into ACOS targets and bid strategies. This prevents spending that eats into your bottom line.

7. Negative Keywords

Adding negative keywords filters searches irrelevant to your products. This reduces wasted ad spend and directly lowers ACOS.

Now that you understand the key influences on ACOS, let‘s look at how to optimize…

8 Expert Tips to Reduce Your Amazon ACOS

Here are my top strategies proven to decrease ACOS and maximize Sponsored Product profitability:

1. Prune Low Quality Score Keywords

Regularly review your keyword quality scores and prune low scoring keywords from campaigns. Improving average quality score reduces the bids needed to rank ads.

2. Analyze Your Search Term Report

Dig into your search term report to uncover the exact queries triggering sales. Identify your top converters and shift budget to heavily emphasize those money terms.

3. Monitor Your Best Selling Products

Pay attention to which ASINs drive the most conversions. Limit exposure on slow sellers to force budget to more efficient products.

4. Let Automation Handle Bidding

Leverage bid automation technology to dynamically adjust bids based on real-time performance data including ACOS. This efficiently optimizes bids at scale.

5. Test Different Match Types

Experiment with using Exact, Phrase, or Broad match for your keywords. The right match for each term can optimize click volume and conversion rate to reduce ACOS.

6. Add Negative Keywords

Build up a robust negative keywords list to filter out irrelevant searches. Reducing these wasted clicks directly lowers your ACOS.

7. Create Highly Targeted Campaigns

Separate products into tightly themed campaigns like “yoga leggings” or “men’s running shoes”. This attracts more qualified clicks.

8. Design Tightly Themed Ad Groups

Similarly, keep ad groups small and focused on product subtype like “cotton yoga leggings” or “motion control running shoes”. This also improves relevancy.

These advanced tactics will master your ACOS like a pro. But how does ACOS differ from ROAS?

ACOS vs ROAS: What’s the Difference?

ROAS and ACOS are two important ecommerce metrics, but they measure different things:

• ACOS shows your ad spend required to generate $1 in sales
• ROAS (return on ad spend) shows revenue earned per $1 in spend

In other words:

• Lower ACOS = Better ad performance
• Higher ROAS = Better ad performance

Let‘s look at an example to illustrate:

• $100 ad spend
• $500 revenue
• ACOS = $100 / $500 = 20%
• ROAS = $500 / $100 = 5X

For the same campaign data, ACOS reveals the percentage of sales revenue spent on ads. ROAS shows the revenue multiple on advertising dollars.

Optimizing to lower ACOS and higher ROAS offers similar benefits – maximizing the profitability of your Sponsored Product program.

Key Takeaways: What You Should Know About Amazon ACOS

We‘ve covered a lot of ground here! Let‘s recap the key points:

• ACOS indicates how much you spend to earn $1 in ad sales
• Lower ACOS equals greater advertising profitability
• Calculate ACOS for your overall account and specific campaigns
• Aim for ACOS under 30% as a good starting goal
• Factors like keywords, bids, and match types impact ACOS
• Monitor and optimize ACOS to maximize Sponsored Product performance

Understanding your Amazon ACOS is crucial for assessing the ROI of your advertising and making smart optimizations.

Now you have the complete guide to tracking, analyzing, and improving your ACOS results! Put these tips into action to boost advertising profitability and take your self-service PPC strategy to the next level.

As always, reach out if you need help getting your Amazon ACOS tuned for maximum profits. I‘m always happy to answer any questions!