Amazon ACOS Explained: What It Is, How to Calculate It, and How to Improve It

If you run Amazon PPC campaigns, ACOS is the number that determines whether your advertising is making money or burning it. ACOS — Advertising Cost of Sales — measures how much you spend on advertising for every dollar of ad-driven revenue. It's the single most watched metric in Amazon advertising, and understanding it deeply is what separates brands that scale profitably from those that throw money at campaigns and hope for the best.

This guide covers everything you need to know about Amazon ACOS — what it means, how to calculate it, what a "good" ACOS actually looks like for your business, and the specific strategies that bring it down without sacrificing sales.

What Is Amazon ACOS?

ACOS stands for Advertising Cost of Sales. It's expressed as a percentage and represents the ratio of your ad spend to the revenue generated from those ads.

The formula is simple: ACOS = (Ad Spend ÷ Ad Revenue) × 100.

If you spend $20 on advertising and generate $100 in ad-attributed sales, your ACOS is 20%. That means you spent 20 cents in advertising for every dollar of ad-driven revenue.

Lower ACOS means more efficient advertising — you're spending less to generate each sale. Higher ACOS means less efficient advertising — you're spending more per sale. But as we'll cover, lower isn't always better. The right ACOS target depends on your margins, your goals, and where you are in your product's lifecycle on Amazon.

ACOS vs. ROAS: What's the Difference?

You'll often see ROAS (Return on Ad Spend) referenced alongside ACOS. They measure the same thing from opposite directions.

ROAS = Ad Revenue ÷ Ad Spend. If you spend $20 and earn $100, your ROAS is 5x (or 500%).

ACOS = Ad Spend ÷ Ad Revenue. Same scenario, your ACOS is 20%.

They're inversely related. A 20% ACOS equals a 5x ROAS. A 50% ACOS equals a 2x ROAS. Amazon's advertising console primarily uses ACOS, while many external tools and agencies reference ROAS. Knowing both helps you speak the same language regardless of who you're working with.

What Is a Good ACOS on Amazon?

This is the most common question sellers ask, and the honest answer is: it depends entirely on your profit margins and business goals.

Start by calculating your break-even ACOS. This is the ACOS at which your advertising-driven sales generate zero profit — you're covering your product cost, Amazon fees, and ad spend, but nothing else. Your break-even ACOS equals your pre-advertising profit margin.

For example, if your product sells for $30, your product cost is $8, Amazon referral and FBA fees total $12, your pre-advertising profit per unit is $10 — a 33% margin. Your break-even ACOS is 33%. At 33% ACOS, every dollar of ad revenue costs 33 cents in advertising, which exactly equals your margin. You break even.

Any ACOS below 33% in this example is profitable. Any ACOS above 33% is losing money on every ad-driven sale.

Target ACOS varies by business objective. If your goal is maximum profitability, you want the lowest ACOS possible while maintaining acceptable sales volume. If your goal is aggressive growth — launching a new product, winning the Best Seller Badge, or building organic ranking — you might intentionally run at a higher ACOS (even above break-even temporarily) because the long-term organic sales gains justify the short-term advertising cost.

Category benchmarks provide useful context but shouldn't drive your strategy. Average ACOS across Amazon varies widely — anywhere from 15% to 40% depending on category and competition. But your target should be based on your specific margins, not industry averages.

How to Lower Your Amazon ACOS

Lowering ACOS without killing sales volume requires optimization across multiple dimensions — not just bid adjustments.

Improve your conversion rate first. ACOS is directly impacted by how well your listing converts clicks into sales. If two sellers have identical bids and click costs, but one converts at 15% and the other at 10%, the higher-converting seller will have a significantly lower ACOS. Before you touch your bids, optimize your listing — images, title, bullet points, A+ Content, pricing, and reviews all affect conversion.

Refine your keyword targeting. Not all keywords are equal. Review your search term reports regularly to identify which search terms are driving profitable sales and which are wasting spend. Add high-performing search terms as exact match keywords with appropriate bids. Add unprofitable search terms as negative keywords to stop spending on them.

Structure your campaigns for control. A common mistake is running broad, loosely structured campaigns where budget gets consumed by low-performing keywords before high-performing ones get adequate spend. Separate your campaigns by match type (exact, phrase, broad), by product, and by performance tier so you can allocate budget precisely where it generates the best returns.

Adjust bids based on performance data, not guesses. Lower bids on keywords with high ACOS and increase bids on keywords with low ACOS and room to scale. But give keywords enough data before making decisions — a keyword with 20 clicks and no sales might just need more volume before you can judge it accurately. Most keywords need at least 30-50 clicks worth of data for reliable performance signals.

Use dayparting if your data supports it. Some products convert better at certain times of day. If your evening conversion rate is significantly higher than morning, you can adjust bids or budgets to weight more spend toward your high-converting hours. Not every account benefits from dayparting, but it's worth analyzing.

Leverage negative keywords aggressively. Every click on an irrelevant search term increases your ACOS without any chance of generating a sale. Review search term reports weekly and add negatives continuously. This is one of the highest-ROI activities in Amazon advertising management.

Optimize your product pricing. A price that's too high reduces conversion rate and increases ACOS. A price that's too low improves ACOS but kills margins. Find the pricing sweet spot where your conversion rate is strong and your margins support your ACOS target.

ACOS by Campaign Type

Different campaign types on Amazon typically produce different ACOS ranges, and understanding this helps you set appropriate expectations.

Sponsored Products campaigns are the workhorse of Amazon advertising and usually produce the best ACOS because they target shoppers with high purchase intent — people actively searching for products. Your best-performing exact match keywords will typically produce your lowest ACOS.

Sponsored Brands campaigns generally have a higher ACOS than Sponsored Products because they serve a dual purpose: driving immediate sales and building brand awareness. The headline format drives traffic to your Brand Store or a custom landing page, which adds a step before purchase. Evaluate Sponsored Brands on a combination of ACOS and brand-building metrics, not ACOS alone.

Sponsored Display campaigns often show the highest ACOS because they include audience targeting and retargeting, which reaches shoppers at different stages of the purchase journey. A shopper who's retargeted after viewing your product might take days to convert, making the immediate ACOS look poor even though the campaign is driving eventual sales. Attribution windows matter here.

Amazon DSP operates at yet another level, focusing on programmatic display and video advertising across Amazon properties and the broader web. DSP campaigns are measured more by total revenue impact and new-to-brand metrics than by traditional ACOS.

The ACOS Trap: When Low ACOS Hurts Growth

One of the most common mistakes brands make is optimizing exclusively for the lowest possible ACOS. While efficient spending matters, an obsessive focus on low ACOS can actually cap your growth.

A very low ACOS often means you're only bidding on the highest-converting, lowest-competition keywords — the easy wins. But those keywords have limited volume. To grow sales, you need to expand into higher-volume keywords where competition is tougher and ACOS will naturally be higher.

The question isn't "what's my lowest possible ACOS?" It's "what's the most I can spend while maintaining profitability at an acceptable level?" A 25% ACOS on $50,000 in monthly ad revenue is far more profitable in absolute dollars than a 15% ACOS on $10,000.

Think of ACOS as a dial, not a score. You're adjusting it based on your goals — turning it up to accelerate growth, turning it down to maximize margins. The right setting changes based on your product lifecycle, competitive dynamics, and overall business strategy.

TACOS: The Metric That Matters More

While ACOS measures advertising efficiency in isolation, TACOS (Total Advertising Cost of Sales) measures your ad spend as a percentage of total revenue — including both ad-driven and organic sales. TACOS = Ad Spend ÷ Total Revenue × 100.

TACOS is a better indicator of your overall Amazon business health because it captures the relationship between advertising and organic growth. As your advertising drives sales and reviews, your organic ranking improves, which generates organic sales that don't cost you anything in ad spend.

A healthy Amazon business shows ACOS that stays relatively stable while TACOS gradually decreases over time. That pattern means your advertising spend is growing your organic sales faster than your ad costs are increasing — the flywheel is working.

If your TACOS is increasing over time, it means you're becoming more dependent on advertising to maintain sales, which suggests your organic ranking or conversion rate is declining. That's a red flag worth investigating.

How Lab 916 Manages ACOS for Brands

Advertising optimization isn't just about lowering a number — it's about aligning your ad strategy with your business goals and executing across campaign structure, keyword strategy, bid management, listing optimization, and budget allocation simultaneously.

At Lab 916, we manage Amazon advertising for established brands with a focus on profitable growth, not vanity metrics. We set ACOS targets based on your actual product margins and business objectives, then build and optimize campaign structures designed to hit those targets while maximizing absolute revenue.

If your ACOS is too high, your ad spend feels uncontrolled, or you're not sure whether your campaigns are actually profitable, request a free audit and we'll analyze your advertising performance and show you exactly where the opportunities are.