If you are an Amazon seller or looking to become one, you need to understand the breakdown of advertising costs and how they can affect your business’s profitability. Amazon sellers often want to figure out how their Amazon advertising sales are performing. When this is the case, certain metrics can be used to calculate how well an Amazon advertising campaign is doing or how much a seller can anticipate earning from the ad campaign. Understanding these calculations can help you determine whether spending money on advertising campaigns helps or hurts your Amazon business. Keep reading to learn the differences between ACoS, TACoS, and ROASS. In addition, please reach out to Ebiz Accounting, who can offer you qualified Amazon Seller Advice and Guidance that can help your Amazon business succeed.
What is Amazon ACoS?
Amazon ACoS is a metric used to measure Amazon sellers’ sales revenue based on pay-per-click (PPC) advertising campaigns. It is imperative to understand profit margins. This metric compares the amount spent on PPC campaigns to the total amount earned. Essentially, ACoS helps Amazon sellers measure how well their advertising campaigns are performing as you pay for ads to bring in more sales.
Many people are confused about how they calculate their ACoS. However, it is fairly simple to calculate. Essentially, you divide your ad spend by your total ad revenue sales and convert it into a percentage. For example, if you spent $50 on an ad campaign and earned $100 from it, your Amacon TACoS would be 50%. This calculation shows how much sales increased from an advertising campaign.
What does TAcoS mean?
Amazon TACoS, or total advertising cost of sale, is another type of metric Amazon sellers can use to measure ad spending based on their total sales revenue. To calculate TACoS, you divide your ad spend by your total sales revenue, including sales and organic sales, and multiply that number by 100.
For example, if your monthly ad spend comes to $1,000 and your total sales come to $10,000, your TACoS would be 10%. Essentially, this means that you generated 10 dollars in sales for every dollar you spent on advertising. Amazon TACoS calculates the ratio of ad spend relative to your total sales revenue which helps you determine the profitability of your advertising campaigns.
What does ROAS mean?
Now, the inverse of Amazon ACOS is the return on ad spend (ROAS). This metric is calculated by dividing ad revenue by ad spend rather than ad spend divided by ad revenue like in ACOS. Instead of calculating the performance and profitability of how well an advertising campaign is doing, ROADS determines how much you could expect to earn from an ad campaign.
If you need assistance calculating how well your Amazon advertising campaigns are doing, contact one of our experienced Ebiz Accounting team members. With years of experience, you can trust us to help you grow your Amazon business by reviewing the right metrics.