Introduction
Amazon advertising has become an essential driver of growth for brands and sellers. But with ad costs rising, sellers often struggle to balance profitability vs. visibility. The key is understanding how ACOS, time, and sales interact—and using that knowledge to make smarter decisions.
This guide unpacks the true meaning of ACOS, the importance of TACoS, the role of time in campaign performance, and how advertising links to organic sales growth.
What is ACOS—and Why It’s Only Part of the Picture
- ACOS (Advertising Cost of Sales) = Ad Spend ÷ Ad Sales
- Low ACOS = efficient ads, but not always better for growth
- High ACOS = can be acceptable if it fuels organic sales velocity
The trap: Sellers chase the lowest possible ACOS without realizing that short-term efficiency may hurt long-term growth.
TACoS: The Smarter Metric
- TACoS (Total Advertising Cost of Sales) = Ad Spend ÷ (Ad Sales + Organic Sales)
- Shows how ad spend impacts overall revenue.
- Declining TACoS = ad spend is fueling organic ranking and brand growth.
- Stable/high TACoS = you may be stuck “buying” sales without building momentum.
The Role of Time in Ad Costs
- Learning Phase: New campaigns often show high ACOS while Amazon gathers data.
- Seasonality: Q4, Prime Day, or niche-specific spikes change competitive dynamics.
- Campaign Aging: Strong campaigns often improve efficiency over time as CTR and conversion rates stabilize.
- Ad Fatigue: Over time, some keywords lose efficiency—requiring new keyword harvesting or negative targeting.
Ads and Organic Sales: The Feedback Loop
- Advertising drives visibility → Visibility drives sales velocity → Velocity boosts organic rank → Organic rank reduces reliance on ads.
- The goal isn’t just good ad performance—it’s ads that unlock organic growth.
How to Balance ACOS, Time, and Sales
- Set Clear Goals by SKU
- Hero products may justify higher ACOS to protect ranking.
- Long-tail products may need stricter ACOS targets to remain profitable.
- Track Contribution Margin
- Don’t measure ads in isolation. Always consider fees, fulfillment, and COGS.
- Monitor TACoS Weekly
- Look for downward trends—signaling that ads are fueling organic sales.
- Optimize Over Time
- Refresh keywords and bids every 2–4 weeks.
- Adjust bids for seasonality and promo windows.
Common Mistakes Sellers Make
- Obsessing over ACOS alone.
- Turning ads off too quickly before campaigns mature.
- Ignoring TACoS and long-term organic growth.
- Failing to connect ad performance to inventory planning.
Case Study Example
A consumer electronics brand was stuck chasing a 20% ACOS. Campaigns that went above this threshold were paused—yet sales plateaued. After shifting focus to TACoS and letting campaigns run longer:
- ACOS rose to ~28%, but TACoS fell from 18% to 12%.
- Organic rank improved on high-value keywords.
- Overall sales grew 35% in 90 days, with net profit increasing.
Advanced Tactics
- Dayparting: Adjust bids based on time of day/week.
- Placement Adjustments: Boost bids for top-of-search placements that convert better.
- Keyword Harvesting: Use auto campaigns to discover new converting terms, then migrate to manual.
- Cross-SKU Strategy: Use ads to drive traffic to complementary products and bundles.
Conclusion
Understanding ACOS, TACoS, and the role of time in ad performance is key to scaling profitably on Amazon. Ads are not just a cost—they are an investment in long-term growth when managed strategically.
The bottom line: Don’t just lower ACOS—unlock the full picture by aligning advertising with sales velocity, time, and organic growth.
