Paid Media Analysis: TACOs, ACoS and More

Paid media allows your products to jump the organic ranking line and get straight in front of customers, making it an important tool in the Amazon tool belt.

ACoS - ACoS or Ad Cost of Sales is calculated as {$ Spent on Ads}/{$ Sales Made by Those Ads}. So if you spend $100 on a certain campaign, keyword or product target and you see that you've made $400 of "Ad Sales" (Sales made from a customer clicking on an ad) the ACoS is calculated as $100/$400 = 25%. ACoS is a great metric because you can easily compare the % of your total revenue spent on Ads as compared to your overall product profitability. For example, if you know that you make 40% profit of your Amazon retail price, and this product has a campaign with 2% ACoS, you know that you have decreased your profitability by half. Alternatively, you can say that your ACoS % can go up to a ceiling of 40% before breaking even on the advertising. Note - ACoS is only taking into account the amount spent on the ad and the sales that came from that ad and does not take into account non-advertising sales.

TACoS - Now that we've learned about the narrow metric of ACoS, lets look into the higher level term of TACoS or Total Ad Cost of Sales. So instead of taking the amount spent on ads and the amount you made from ads, the TACoS calculating works on the amount spent on ads divided by ALL sales for the products you are looking at. So TACoS answers the question "My Ad spend is what percentage of all of my revenue?" This number should be expected to be between 1% and 15%

TACoS is best analyzed by looking at the number overtime. For example, a TACoS % that stays the same or decreases while spend increases is a good indicator that your advertising is leading to incremental organic sales.

Search Term Report - The first place to look is at the top spending search terms on the account. This will give you a great idea on which search terms are receiving the highest spend, what the efficiently and scale they are. Note - Search Terms are different from Keywords. Search Terms represent the exact word or phrase that customers are typing in. If you have $100 spent on the Search Term "Dog Food" you can be confident that this spend targeted only customers who typed in EXACTLY the words "Dog Food" into the search bar. Keywords can target multiple Search Terms and so they are a bit more broad. For example, the keyword "Dog Food" if using Phrase Match match type can target: "Dog Food", "Dog Food for large Dogs", "Dog Wet Food" and many other keywords. Although the Keyword Report is useful, the Search Term report gives you much more granular idea on what the actual customer intent is.