Advertising Cost of Sales (ACoS) - Key Metric on Amazon
ACoS (Advertising Cost of Sales) refers to the revenue generated by an advertisement in relation to the expenses for this advertisement.
Let's look at an example:
You sell a product for 20 euros gross and spend 10 euros on advertising within a week. Through advertising, you achieved ten sales and thus earned 200 euros. Your expenses (10 euros) therefore represent 5% of your revenue (200 euros). The ACoS is therefore 5%.
When calculating, you must note the following:
Organic sales remain unconsidered in the calculation
Advertising costs do not receive sales tax, which is why you must initially deduct the tax from your calculations (With a sales tax of 19%, your net revenue from the example is 168 euros; therefore, the ACoS would be 6% here).
The smaller the value of the Advertising Cost of Sales, the lower your advertising costs are. However, whether you make a profit or loss with your advertisements, you can see by looking at the ratio of ACoS and your margin. If the ACoS corresponds to your margin, you have only reached the break-even point and therefore made neither profit nor loss.
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