ACoS vs TACoS: How to Lower Your Amazon Ad Costs Without Losing Sales
Most sellers watch ACoS. The sellers who grow profitably watch ACoS and TACoS together. Here is what each number tells you, how to find the ACoS your margins can actually afford, and seven changes that bring ad costs down without strangling sales.
What ACoS measures
ACoS (Advertising Cost of Sales) is your ad spend divided by the sales those ads produced.
ACoS = ad spend ÷ ad sales × 100
If you spend $500 on Sponsored Products and those ads are credited with $2,000 in sales, your ACoS is 25%. It answers one narrow question: how efficient are my ads at turning clicks into attributed sales?
What TACoS measures
TACoS (Total Advertising Cost of Sales) divides the same ad spend by your total sales, organic and paid together.
TACoS = ad spend ÷ total sales × 100
With the same $500 in ad spend and $6,000 in total sales for the period, your TACoS is 8.3%. TACoS shows how dependent the whole business is on advertising, and whether ads are helping organic sales grow.
Why you need both numbers
Either number on its own can mislead you. Read them together:
| ACoS | TACoS | What it usually means |
|---|---|---|
| Falling | Falling | Healthy. Ads are getting more efficient and organic sales are growing. |
| Rising | Falling | Often fine. You are investing in ads that are lifting organic rank and total sales. |
| Falling | Rising | A warning. Ads look efficient, but organic sales are slipping and ads are filling the gap. |
| Rising | Rising | A problem. Spend is growing faster than sales. Time for an audit. |
Find your break-even ACoS first
A "good" ACoS is not a universal number like 25% or 30%. It depends on your margin. Your break-even ACoS is your profit per unit before advertising, divided by the selling price.
Example: a product sells for $40. Product cost and inbound shipping are $10, the FBA fulfilment fee is $7, the referral fee is $6 and other costs are $2. That leaves $15 of profit before ads, so the break-even ACoS is 15 ÷ 40 = 37.5%. Below 37.5% each ad sale is profitable; above it, each ad sale loses money.
Set your target ACoS below break-even for mature products, and accept a higher figure only on purpose, for example during a launch.
Seven ways to lower ACoS without losing sales
1. Add negative keywords from the search term report
Download the search term report for the last 30 to 60 days. Search terms that have spent more than roughly two to three times your target cost per order without a sale, or that are clearly irrelevant, should become negative exact or negative phrase keywords. This is usually the fastest saving in any account.
2. Harvest converting search terms into exact match
When a search term from an auto or broad campaign converts well, move it into an exact match campaign where you control its bid, and add it as a negative in the original campaign so the two stop competing.
3. Adjust bids by placement
Top of search, product pages and rest of search often convert at very different rates. Check the placement report and raise or lower placement adjustments based on the ACoS each placement delivers, rather than moving every bid up or down together.
4. Lower bids on targets that spend without converting
For each keyword and product target, compare clicks with your conversion rate. If your listing converts at 10%, a target with 25 clicks and no orders has had a fair chance. Reduce its bid step by step instead of pausing it at the first sign of trouble.
5. Fix the listing before you raise the budget
Ads send traffic; the listing converts it. Main image, title, price, reviews and A+ content all change your conversion rate, and a higher conversion rate lowers ACoS on every campaign at once. See our listing optimization service.
6. Protect organic rank instead of paying for it twice
If you already rank in the top organic positions for a keyword, test lower bids on it. Many brands find they keep most of the sales organically and free up budget for keywords where they do not rank yet.
7. Move budget to what works
Campaigns that run out of budget early in the day while performing under target are your best opportunities. Shift budget from campaigns that miss target into those that hit it, and review the split every week.
When a high ACoS is the right call
A launch, a push for organic rank on a key search term or a seasonal peak can justify spending above break-even for a set period. The difference is intent: decide the time frame and the TACoS you will accept in advance, then return to profit targets once the goal is reached.
What this looks like in practice
In our client work, negative keyword and bid restructuring reduced ACoS by 20% for a Home & Kitchen brand, and a Sports & Outdoors brand cut TACoS by 57% while sales kept growing. Results depend on the category, margins and starting point of each account.
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