How to Calculate Amazon ACoS (And Why I Wish I’d Known This Sooner)

Last updated on November 18th, 2025 at 12:36 pm

Be honest, I will tell you, at the very beginning of selling on Amazon, I was not aware of what ACoS was. I simply wasted money on advertisements and crossed my fingers. Spoiler alert: it didn’t. I was spending more than I was recouping inventory and my margins? Basically nonexistent.

And then I, at last, sat down and got to know how I can calculate Amazon ACoS. And how, how it all changed everything. Then there are my things that I would have liked someone to tell me on the very first day were I in the same boat as I was.

What Even Is ACoS?

ACoS is an acronym that means Advertising Cost of Sales. It is simply a ratio that gives you how much you are paying in advertisements as relative to what you are gaining on such advertisements.

The formula is stupid simple:

ACoS = (Ad Spend / Ad Revenue) x 100

Therefore, using the same example in which the cost of advertisements is 50 and the amount you receive in sales as a result of the advertisement is 200, then your ACoS value would be 25. That amounts to spending half a dollar on every dollar of your earnings.

The last time I had totalled mine, it stood at 65%. Yeah. Not great.

The Reason why you really Should know this.

This is the point, you cannot simply compare your overall sales and believe that you are winning. I had been making such a mistake months. Then I would get excited because of getting a look of $2,000 in sales but I would remember that I would have spent 1.300.00 in advertisements to get that.

Your ACoS informs you whether or not your advertising is actually working or you are simply wasting money. Reduction of ACoS implies that you are incurring a reduced expenditure to earn the same money. A higher one? Well, you must be losing money just like I was.

The actual question is: what is a good ACoS? And frankly it is a matter of your profit margin.

In Discovery Magazine, Finding Your Breakeven Point.

This section was initially a drawback to me. I considered a score of less than 50 in ACoS as satisfactory. Wrong.

Your before ads profit margin is your breakeven ACoS. Suppose you make your product costing 30, ship it at cost of 15 with Amazon charging and you sell it at 100. That is a 55 before advertising. You make 55% profit so your breakeven ACoS is 55%.

When your ACoS exceeds the number, then you are making a loss on any sale. Below it? You’re actually profitable.

I have started to use free calculators such as Trellis because I did the math manually, which became tedious after a short time.

What I Learned the Hard Way

I panicked and stopped all when my ACoS sky-rocketed. Big mistake. It turns out you have to reason why it is high then you simply kill your campaigns.

The reason why an ACoS is so bad is normally this:

Bad keywords. My bids were on outlandishly wide terms that took in browsers and not buyers. The conversion rate increased and the ACoS decreased by 20% when I changed to longer and more specific keywords.

Terrible product listing. My photos were average, my bullet points were dull and I received three reviews. People may have clicked my ad but they were not purchasing. My listing was the first thing that I repaired, and my ACoS finally became better.

Ignoring placements. Amazon displays your advertising in other locations – at the top of the search, product pages, remainder of the rest of the search. I had not known that I was spending money on placements that were not converting. After I verified my placement reports and modified bids, matters became much more effective.

Not using negative keywords. This one hurt. I continued spending money on clicks on absolutely irrelevant searches. The use of negative keywords eliminated the junk articles and saved me hundreds.

How I Did Decrease My ACoS.

Once I worked out the calculation aspect, I was forced to clean up the mess that I had made. Here’s what worked:

I began to see my campaigns every week rather than letting them go. I would check the keywords that were consuming my budget without paying off, and would decrement the bids on them or terminate such bids.

I also quit the attempt to compete with the major brands on the popular keywords. Instead, I concentrated on narrow words at which the price per click was cheaper and the purchasers were more intentional.

And honestly? I was fine with the fact that a bigger ACoS was an intrinsic aspect of the game in my launch phase. I required reviews and sales velocity to legally rank. After accumulating that, I was in a position to be more aggressive in reducing the amount that I spend on ads.

The Bottom Line

It is not too complex to calculate Amazon ACoS, ad spend over ad sales. However, what actually that number means to your business? Here old business begins.

Had I gotten a chance to go back and advise myself one thing, it would be this: make sure you review your ACoS on a weekly basis, understand where you breakeven, and don’t lose your head when it is too high at the start. Only find out what is not functioning and repair it bit by bit.

Your advertisement must be earning you profits and not draining your bank-account. After striking that, selling on Amazon becomes a lot easier.