Every profession has a number everyone watches. In baseball, for decades it was batting average. In finance, it was share price. In pay-per-click advertising, for a lot of brands, that number is ACoS. And just like batting average, ACoS tells you something real and useful, but the moment you treat it as the whole story, you start making decisions that look smart on paper and cost you money in practice.
ACoS, or Advertising Cost of Sales, is one of the most commonly used metrics in digital advertising for measuring how efficiently your ad spend is turning into revenue. Understanding what ACoS measures, how to calculate it, and where it has real blind spots is essential for any brand that wants to get smarter about its paid media strategy and stop leaving money on the table.
Key takeaways
- ACoS (Advertising Cost of Sales) measures the percentage of ad-attributed revenue that was spent on advertising, calculated using the following formula: Ad Spend divided by Ad Revenue, multiplied by 100.
- A lower ACoS indicates a more efficient ad campaign, meaning you’re spending less to generate each dollar of attributed revenue.
- ACoS and ROAS are mathematical inverses of each other, measuring the same spend-to-revenue relationship from opposite directions.
- TACoS (Total Advertising Cost of Sales) is a more complete metric for brand health because it factors in total revenue, not just ad-attributed sales, giving you a view into how your paid activity is supporting organic growth over time.
- What counts as a good ACoS depends entirely on your profit margin, your campaign objective, and whether you’re in a growth phase or optimizing for profitability.
- ACoS only measures attributed sales and misses a significant portion of advertising impact: the halo effects that spill over into organic traffic, branded search, direct visits, and retail channels.
- Pairing ACoS with broader measurement tools, like marketing mix modeling, gives you a much more accurate picture of what your advertising is actually doing for your brand.
What is ACoS?
ACoS stands for Advertising Cost of Sales. At its core, it’s a percentage ratio that tells you how much of your ad-generated revenue went back into funding that advertising. The lower the percentage, the more efficiently your ads are working.
ACoS is calculated using the following formula:
ACoS = (Ad Spend ÷ Ad Revenue) × 100
So if you spent $2,000 on ads and those ads generated $10,000 in revenue, your ACoS would be 20%. That means for every dollar you earned through your advertising campaigns, you spent 20 cents to get it.
ACoS is commonly used across Amazon advertising campaigns, sponsored products, sponsored brands, and other paid advertising formats. It shows up at the campaign level, the ad group level, and even at the keyword level, which makes it a useful lever for managing ad campaign efficiency and making decisions about where to increase spend, where to cut back, and which search terms or keywords are pulling their weight.
One thing worth noting: ACoS measures attributed revenue only. That means it counts sales that the ad platform has directly credited to your ads. What happens beyond the click, or as a result of an impression someone saw but didn’t act on immediately, isn’t captured here. We’ll come back to why that matters.
ACoS vs. ROAS: Two sides of the same coin
If you’ve worked in digital advertising for any length of time, you’ve probably run into both ACoS and ROAS. They’re often discussed as if they’re different metrics, but they’re actually mathematical inverses of each other. Understanding the relationship between them helps you use each one more intentionally.
ROAS, or Return on Ad Spend, is calculated as:
ROAS = Ad Revenue ÷ Ad Spend
So while ACoS asks “what percentage of my revenue did I spend on ads?”, ROAS asks “how many dollars did I get back for every dollar I spent?” Using the same example as above, a $2,000 spend generating $10,000 in revenue produces a 20% ACoS and a 5x ROAS. Both figures describe the same campaign performance.
You can convert between the two pretty easily. To calculate ACoS from ROAS, divide 1 by your ROAS and multiply by 100. A 5x ROAS equals a 20% ACoS. Conversely, to find ROAS from ACoS, divide 100 by your ACoS percentage. A 25% ACoS equals a 4x ROAS.
When it comes to which one to use, the choice often comes down to context and convention. Brands using Amazon advertising and retail media managers tend to reach for ACoS because it ties naturally to margin discussions and feels more intuitive when thinking about ad costs relative to sales revenue. Performance marketers running campaigns on Meta, Google, and other platforms tend to default to ROAS because it frames results as a return on investment.
Neither is more correct than the other. Both share the same ceiling: they only reflect attributed sales, which brings us to why TACoS deserves a spot in this conversation.
What is TACoS, and why does it give you a fuller picture?
TACoS stands for Total Advertising Cost of Sales, and it shifts the denominator in a meaningful way. Where ACoS divides your ad spend by ad-attributed revenue, TACoS divides your ad spend by your total revenue, including organic sales.
TACoS = (Ad Spend ÷ Total Revenue) × 100
That distinction matters more than it might seem at first. A brand doing $10,000 in total sales with $7,000 attributed to ads and $3,000 coming from organic traffic will have a very different TACoS than ACoS. If ad spend was $1,400, that’s a 20% ACoS but only a 14% TACoS.
Here’s why TACoS is so useful for understanding your brand’s overall health: a well-run advertising program should be building brand equity over time. As more people discover your brand through paid campaigns, you’d expect more organic sales to grow alongside them. When your TACoS is declining even as you maintain or grow ad spend, that’s a sign your advertising is doing something beyond just purchasing clicks. It’s building recognition, driving repeat visits, and contributing to organic growth.
Tracking TACoS alongside ACoS is especially valuable for brands in a growth phase, where short-term ACoS efficiency targets might actually conflict with longer-term revenue goals. A campaign that looks expensive on an ACoS basis might be fueling meaningful organic sales lift that never shows up in platform reporting.
What is a good ACoS?
This is the question everyone asks, and the general rule is that the answer depends. There’s no universal good ACoS, and setting a blanket target across all your campaigns is one of the more common mistakes brands make when trying to manage advertising performance.
The most useful starting point is your break-even ACoS. This is the ACoS at which your advertising dollars are exactly covered by the revenue they generate, with no profit remaining after accounting for costs. To find it, start with your profit margin: if your profit margin on a product is 35%, your break-even ACoS is 35%. Any ACoS higher than that and you’re losing money on those ad sales. Any ACoS lower and you’re in the black.
Your target ACoS should sit below your break-even point by enough to hit your desired profit margin on ad-driven sales. If your break-even ACoS is 35% and you want a 15% return margin, your target ACoS would be around 20%.
Beyond margin math, your campaign objective has a significant impact on what a reasonable ACoS looks like. Here’s a general framework worth keeping in mind:
- Awareness and prospecting campaigns: These are designed to introduce your brand to new audiences. A higher ACoS is expected and acceptable here because the goal isn’t immediate conversion. Holding a top-of-funnel campaign to the same ACoS standard as a retargeting campaign is a good way to underinvest in new customer acquisition.
- New product launches: Expect a higher ACoS while you gather data, build reviews, and establish search relevance. As the product matures, you can work on lowering bids and tightening targeting to bring ACoS down.
- Mature, high-converting campaigns: These are your workhorses, and they’re where a stricter ACoS target makes sense. You know your audience, your keywords are dialed in, and you have enough history to optimize aggressively.
- Auto campaigns vs. manual campaigns: Automatic campaigns tend to produce a higher ACoS early on because they’re casting a wider net. Use them to find keywords, then migrate winning search terms to manual campaigns where you have more control over bids and targeting.
The short version: a good ACoS is one that’s below your break-even point and appropriate for the campaign’s objective. Aiming for the same ACoS across every campaign in your account will create problems on both ends, either pulling the plug on upper-funnel activity that’s doing more than ACoS can measure, or keeping inefficient lower-funnel campaigns running because they hit an arbitrary target.
Where ACoS falls short as a measurement tool
ACoS is a useful metric, but it’s built on a foundation of attributed sales, which means it only counts the revenue that a platform has decided to credit to your ad. And platform attribution has a well-documented problem: it’s incomplete.
Think about how customers actually shop. Someone sees a Meta ad for your product while scrolling on their phone. They don’t click. A few days later, they search for your brand directly, land on your site, and buy. That sale shows up in your direct traffic or branded search data, but nowhere in your Meta ACoS. The campaign that started the whole process gets no credit.
This phenomenon is what Prescient AI calls halo effects: the revenue impact of your advertising that spills over into channels beyond the one where the click happened. A single prospecting ad campaign can drive revenue through organic traffic, branded search, direct visits, and even Amazon sales from customers who saw an ad on a completely different platform. None of that revenue shows up in a platform’s ACoS calculation.
The result is that ACoS frequently undervalues upper-funnel and awareness ad campaigns. These campaigns look inefficient by the numbers because their most important effects are happening somewhere ACoS can’t see. Brands that optimize exclusively to reduce ACoS can end up cutting exactly the campaigns that are driving their organic growth and new customer acquisition.
There’s also the issue of platform self-reporting. Most advertising platforms use last-click or similar attribution methods to determine which ad gets credit for a sale. These methods systematically over-credit bottom-of-funnel campaigns and under-credit the earlier touchpoints that created the intent to buy in the first place. When a platform tells you that an ad generated X dollars in revenue, they’re not necessarily wrong. They’re just giving you a narrow slice of a more complex picture.
ACoS also says nothing about customer quality. Two campaigns might produce identical ACoS figures while delivering customers with completely different lifetime values. Evaluating your advertising purely through the lens of ACoS and campaign efficiency can obscure whether you’re actually acquiring the right customers for your business.
How to use ACoS effectively in your advertising strategy
Knowing ACoS’s limitations doesn’t mean abandoning the metric. It’s still a practical, fast way to monitor campaign efficiency and catch problems early. The key is using it as one tool in a broader measurement toolkit rather than the final word on advertising performance.
Here are a few principles that tend to lead to better outcomes:
- Set campaign-specific ACoS targets rather than account-wide ones. Awareness campaigns, new product launch campaigns, and retargeting campaigns are doing different jobs and shouldn’t be held to the same standard. Your campaign manager will tell you this too.
- Use break-even ACoS as your floor, not your ceiling. Knowing the point at which a campaign becomes unprofitable is useful, but your target ACoS should build in enough margin to make the spend worthwhile.
- Track TACoS alongside ACoS to understand whether your advertising program is building or eroding organic sales over time. A rising ACoS alongside a declining TACoS is a much more encouraging signal than a low ACoS with flat total revenue.
- Negative keywords and search term audits matter. A significant portion of wasted advertising dollars often comes from campaigns matching against irrelevant search terms, which inflates ACoS and reduces overall campaign performance. Regular search term reviews and aggressive use of negative keywords can meaningfully improve ACoS without requiring a budget cut.
- Use auto campaigns strategically. Automatic campaigns tend to produce a higher ACoS than manual campaigns because they’re exploring. That’s fine as long as you’re mining them for useful keywords to bring into manual campaigns where you have more control.
- Consider customer lifetime value when evaluating ACoS. An ad sale that looks expensive on an ACoS basis might be very profitable when you factor in repeat purchases, higher average order values, or lower future acquisition costs from a customer who becomes a loyal buyer.
The brands that get the most out of ACoS are the ones that treat it as a campaign-level efficiency signal and pair it with measurement tools that can fill in the gaps it can’t see.
How Prescient AI helps you see beyond ACoS
ACoS tells you what platforms credit to your ads. Prescient AI tells you what your ads are actually doing. Our marketing mix model measures the full revenue impact of your advertising campaigns, including the halo effects that spill over into organic traffic, branded search, direct visits, and Amazon sales driven by non-Amazon campaigns. That means you can see how a prospecting campaign on Meta is affecting your total revenue picture, not just the clicks it generated. And because our models update daily at the campaign level, you’re not making decisions based on quarterly snapshots. You’re working with current data you can actually act on. If you want to see how your campaigns are performing beyond what the platforms are showing you, book a demo to see Prescient AI in action.
FAQs
Are ACoS and ROAS the same?
ACoS and ROAS aren’t the same metric, but they measure the same relationship between ad spend and revenue from opposite directions. ROAS tells you how much revenue you generated per dollar spent (Revenue ÷ Spend), while ACoS tells you what percentage of your ad-attributed revenue went back into advertising (Spend ÷ Revenue × 100). A 5x ROAS is the same ad campaign performance as a 20% ACoS. The preference for one over the other tends to come down to platform convention and how your team likes to frame efficiency.
What is ACoS vs. ROAS?
ACoS (Advertising Cost of Sales) is expressed as a percentage and represents what share of your attributed sales revenue was consumed by advertising spend. ROAS (Return on Ad Spend) is expressed as a multiplier and represents how many dollars you got back in revenue for every dollar you put into ad campaigns. Both metrics share the same blind spot: they only account for revenue that gets directly attributed to your ads by a platform, which means they can undercount the true impact of upper-funnel or awareness-driving campaigns.
How do you calculate ACoS from ROAS?
To calculate ACoS from ROAS, divide 1 by your ROAS figure and multiply by 100. For example, a 4x ROAS converts to a 25% ACoS (1 ÷ 4 = 0.25, multiplied by 100). Going the other direction, to find ROAS from ACoS, divide 100 by your ACoS percentage. A 25% ACoS equals a 4x ROAS. Because they’re mathematical inverses of each other, improving one automatically improves the other.
