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A metric that helps to evaluate the effectiveness of the advertising campaigns by determining the ad spend in relation to the sales made through those ads in terms of percentage.
Formula: ACoS = (Ad Spend/Sales Revenue) ร 100
Key points:
โขA low ACoS is always better than a high one as it shows the effectiveness of the campaign.
โขMainly used in Amazon and other marketplace advertising.
โขUsed to determine the profitability of the advertising campaigns.
โขHowever, it cannot be used alone to determine the actual profitability of the business because it does not include other costs.
Example: If you spend $20 on ads and drive $100 in sales, your ACoS is 20%.
Business application: To help in identifying the best bidding tactics, finding the keywords that are most effective and in modifying the campaign budget in order to get the most out of the ad spend.
Related metrics: ROAS (Return on Ad Spend) is the opposite of ACoS (ROAS = Sales Revenue รท Ad Spend).
