Amazon PPC Basics: ACoS, TACoS and Budgets Explained

Amazon advertising reports are full of acronyms, and it is easy to optimise the wrong number. This guide explains the metrics that matter, how they connect to profit, and how to set budgets and bids from your own numbers. For campaign structure and day-to-day management, read our Amazon PPC management guide.

The building blocks

Every ad sale comes from three steps: a shopper sees your ad, clicks it, and buys.

Impressions: how many times your ad was shown.
Click-through rate (CTR): clicks divided by impressions. Mostly driven by your main image, title, price, rating and review count.
Cost per click (CPC): what you pay for each click, set by the auction for that keyword or placement.
Conversion rate (CVR): orders divided by clicks. Driven by your listing, price, reviews and how relevant the search was.

These lead to the number that matters most:

Cost per order = CPC ÷ conversion rate.

Example: if clicks cost $0.80 and 10% of clicks buy, each ad order costs $0.80 ÷ 0.10 = $8.00. Raise the conversion rate to 15% and the cost per order falls to $5.33 without changing the bid. That is why fixing the listing often does more for advertising than changing bids.

ACoS: advertising cost of sales

ACoS = ad spend ÷ ad sales × 100.

If you spend $200 and the ads produce $1,000 in attributed sales, ACoS is 20%.

ACoS tells you how efficient your ads are on their own. Lower is cheaper, but lower is not always better: very low ACoS often means you are only bidding on cheap, narrow searches and missing sales.

ROAS (return on ad spend) is the same idea upside down: ad sales ÷ ad spend. An ACoS of 20% equals a ROAS of 5. Amazon shows both.

Break-even ACoS: the number to know first

Your break-even ACoS is your profit margin before advertising, as a percentage of the price.

Example:

	Per unit
Price	$30.00
Product and freight cost	$7.00
Amazon referral fee (15%)	$4.50
FBA fee and other Amazon fees	$5.50
Profit before ads	$13.00
Break-even ACoS	$13 ÷ $30 = 43%

If campaigns run at 43% ACoS, ad sales make zero profit. Below 43% they make profit; above it they lose money on each ad sale. Every product has its own break-even ACoS, so calculate it for each one using Amazon's current fees for that product.

Your target ACoS depends on the goal:

Launching a product: you may accept ACoS above break-even for a while to get sales and reviews, as a planned investment.
Growing: around break-even, to win more sales and ranking.
Profit: well below break-even.

Decide the goal for each product before judging its numbers.

TACoS: total advertising cost of sales

TACoS = ad spend ÷ total sales (ads + organic) × 100.

If you spend $200 on ads and sell $2,000 in total, TACoS is 10%.

TACoS shows how dependent the business is on advertising. Watch the trend over months:

Falling TACoS while sales grow: ads are helping organic sales grow. This is the healthy pattern.
Rising TACoS with flat sales: you are buying sales that you used to get organically, or competition is increasing.
Very low TACoS with falling sales: you may be under-advertising and losing ground.

There is no universal "good" TACoS. It depends on margin, category competition and whether you are launching or established. Compare against your own history and your margin.

Setting daily budgets

A simple starting method for a campaign:

Estimate the cost per order (CPC ÷ expected conversion rate). Use suggested bids and your listing's current conversion rate.
Decide how many orders per day you want from that campaign to learn quickly.
Daily budget ≈ cost per order × target orders per day.

Example: $8 per order × 3 orders a day = about $24 a day.

Then watch for:

Budget running out early in the day: you miss sales in the evening, when many US shoppers buy. Raise the budget on profitable campaigns or lower bids.
Budget never spent: bids may be too low, or keywords too narrow.

Setting bids from your numbers

Maximum profitable CPC = price × target ACoS × conversion rate.

Example: $30 price × 30% target ACoS × 10% conversion rate = $0.90. Bidding above $0.90 on that keyword will, on average, push ACoS above 30%.

This gives you a sensible starting point for each keyword. Adjust weekly as real data comes in, and remember that one or two orders are not enough data to judge a keyword.

What to review each week

Search terms with clicks and no sales: add them as negatives if they are irrelevant.
Search terms with good sales: add them as exact match keywords.
ACoS by campaign against each product's target.
Budget usage: which profitable campaigns run out of money.
TACoS trend for the whole account.

Common mistakes

Judging ads by ACoS alone, without knowing break-even.
Turning off ads completely on a product that needs them to rank.
Raising bids when the real problem is a weak listing or a poor price.
Changing bids daily based on too little data.
Forgetting that ad-attributed sales include some buyers who would have bought anyway, which is why TACoS matters.

Frequently asked questions

What is a good ACoS on Amazon?

One that is below your break-even ACoS for the product's goal. A 35% ACoS can be very profitable for a high-margin product and a loss for a low-margin one.

Should I use automatic or manual campaigns?

Both. Automatic campaigns find new search terms; manual campaigns give control over proven ones. See our PPC management guide.

Can Markify manage our ads?

Yes. PPC management with weekly optimisation is part of our Amazon account management service.

Work with Markify Ecommerce

Markify Ecommerce (listed on Google Maps as Markify Ecommerce - Unicored Technologies) is an ecommerce marketplace management agency in Bahria Orchard, Lahore. We manage Amazon, eBay, Walmart, Shopify, Etsy and TikTok Shop accounts, and we set up US LLCs and UK Ltd companies for Pakistani sellers.

Office: Central Block, Bahria Orchard, Raiwind Road, Lahore 55150, Punjab, Pakistan
Phone & WhatsApp: +92 321 3131641
Free account audit: Send us your store or account details and we will reply with the first fixes we would make.