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Last Updated: October 2025

Managing your Amazon advertising campaigns effectively makes the difference between profitable growth and burning cash. Two metrics tell you almost everything you need to know about your advertising performance: Advertising Cost of Sales (ACoS) and Total Advertising Cost of Sales (TACoS).

Here’s what you need to know to use these metrics correctly in 2025 and beyond.

What’s New in Amazon Advertising for 2025

Amazon rolled out significant advertising innovations in 2025 that change how you should think about campaign performance. The platform introduced AI-powered contextual pause ads that dynamically align your message with what viewers are watching, creating what Amazon calls “scene-aware ads.” These new formats include live pricing, current deals, and Prime eligibility signals right in the ad unit.

In October 2025, Amazon launched agentic AI creative tools that help you generate and test ad variations faster than ever before. If you’re not using these tools to run more creative tests, you’re leaving money on the table.

According to Amazon Ads, Prime Video’s ad-supported tier now reaches over 130 million U.S. customers monthly, and 88% of those viewers also shop on Amazon. This means your upper-funnel video ads can directly support lower-funnel conversions, making TACoS (which we’ll explain below) more important than ever for understanding your total advertising efficiency.

Understanding ACoS (Advertising Cost of Sales)

ACoS tells you how much you’re spending on ads to generate one dollar of attributed sales. It’s the foundation of profitable Amazon advertising.

The formula:

$$\text{ACoS} = \frac{\text{Ad Spend}}{\text{Ad Sales}} \times 100$$

If you spent $1,000 on ads and those ads generated $5,000 in sales, your ACoS is 20%. You spent $0.20 on advertising for every dollar of revenue those ads directly generated.

2025 benchmark ranges:

• Good (established products): 15–20%
• Platform average: 25–30%
• High (needs attention): 40%+

Your target ACoS depends entirely on your profit margins and business stage. A 30% ACoS might be profitable for a product with 50% margins, but it would lose money on a product with 35% margins.

What Actually Affects Your ACoS

Product price: Higher-priced items usually have lower ACoS because each sale generates more revenue. A $15 product needs to convert twice as well as a $30 product to achieve the same ACoS.

Conversion rate: More clicks turning into sales means lower ACoS. According to 2025 data, Amazon PPC conversion rates average 9.96–10.33%, significantly higher than most other advertising channels.

Click-through rate (CTR): Better CTR means your ads are relevant to what people are searching for. More relevant ads get more sales at lower costs.

Competition and CPC: Amazon’s average cost-per-click in 2025 ranges from $0.99 to $1.04, with seasonal lows around $0.82 and highs hitting $1.14 during peak shopping periods, though this varies significantly by category and competition level. Higher competition drives up your costs.

Product lifecycle: New product launches often require higher ACoS (sometimes 40–50%) to build initial momentum and reviews. Established products should operate at lower, more profitable ACoS levels.

Your Break-Even ACoS

Before you set any targets, calculate your break-even ACoS:

$$\text{Break-even ACoS} = \frac{\text{Unit Margin}}{\text{Selling Price}} \times 100$$

Example: Your product sells for $50. After product costs ($20) and Amazon fees ($12), your unit margin is $18.

$$\text{Break-even ACoS} = \frac{18}{50} \times 100 = 36%$$

Any ACoS below 36% makes you money. Any ACoS above 36% loses money on each sale. Your target should be below break-even, and the specific target depends on your profitability goals.

How to Lower Your ACoS

Optimize your listings first. No amount of ad spend fixes a listing that doesn’t convert. High-quality images, clear benefits, strong A+ Content, and keyword-optimized copy improve your conversion rate, which directly lowers ACoS.

Use negative keywords aggressively. Check your search term report weekly. Add any irrelevant or low-converting terms as negative keywords immediately. This prevents wasted spend on clicks that won’t convert.

Adjust bids based on performance. Increase bids on keywords generating sales below your target ACoS. Decrease bids on keywords above your target. Use Amazon’s bid adjustment features for placement and device-level optimization.

Test different match types strategically. Broad match discovers new keywords. Phrase match gives you control with some discovery. Exact match maximizes efficiency for proven performers. Use all three in coordinated campaigns.

Structure campaigns by profitability. Keep high-margin products in separate campaigns from low-margin products. This lets you set appropriate ACoS targets for each and allocate budget where it matters most.

Leverage Amazon’s AI bid tools. Amazon’s 2025 optimization features use machine learning to adjust bids based on likelihood to convert. Start with dynamic bids (down only) for new campaigns, then test more aggressive strategies as you gather data.

Understanding TACoS (Total Advertising Cost of Sales)

While ACoS measures ad efficiency, TACoS measures how advertising fits into your total business. TACoS is a business health metric, not just a campaign efficiency metric.

The formula:

$$\text{TACoS} = \frac{\text{Ad Spend}}{\text{Total Revenue}} \times 100$$

TACoS includes all revenue (both organic sales and ad-attributed sales), giving you a complete picture of advertising’s role in your business.

Example: You spent $2,000 on ads in a month. Your total revenue that month was $20,000 (including $6,000 from ads and $14,000 organic).

$$\text{TACoS} = \frac{2,000}{20,000} \times 100 = 10%$$

Your advertising spend represents 10% of total revenue.

Why TACoS Matters More Than You Think

TACoS shows the organic lift your advertising creates. When you improve your product’s relevance through advertising, you climb in organic rankings. This means your TACoS can decrease even while maintaining the same ACoS, because organic sales grow.

Good advertising creates a virtuous cycle:

1. Ads drive initial sales and velocity
2. Velocity improves organic ranking
3. Higher organic ranking generates more organic sales
4. More organic sales decrease TACoS
5. Lower TACoS creates room to invest more in advertising

Sellers who only watch ACoS miss this bigger picture. You could have a 25% ACoS that looks expensive, but if it’s generating enough organic lift to maintain a 10% TACoS, your advertising is extremely effective.

TACoS Tells You About Business Stage

High TACoS (15–25%): Usually indicates new products, aggressive growth phases, or heavy dependence on paid traffic. This isn’t always bad during launch periods, but it’s not sustainable long-term.

Moderate TACoS (10–15%): Typical for growing brands with decent organic presence. You’re driving growth with ads but also building organic momentum.

Low TACoS (5–10%): Strong organic presence with ads supporting rather than driving most sales. This is the goal for mature, established products.

Very low TACoS (<5%): Either your organic presence is dominant, or you’re underinvesting in advertising and potentially leaving growth on the table.

The ACoS vs. TACoS Framework for Better Decisions

Now that you understand both metrics individually, here’s how to use them together.

Use these metrics at different decision levels:

ACoS is for campaign and keyword-level optimization. When you’re in your campaigns adjusting bids, pruning search terms, or testing new keywords, watch ACoS. It tells you if individual tactics are efficient.

TACoS is for catalog and brand-level strategy. When you’re deciding overall ad budgets, evaluating product viability, or setting growth goals, watch TACoS. It tells you if your advertising creates sustainable business growth.

How to Improve Your TACoS Metrics

Build organic ranking through advertising. Use aggressive ACoS targets during launches (40–50%) to build velocity, then gradually lower ACoS as organic sales increase. The temporary high spend drives long-term efficiency.

Invest in Amazon SEO. Optimized titles, backend keywords, A+ Content, and Brand Stores improve organic discoverability. Better organic ranking means lower TACoS without reducing ad spend.

Use video content in listings and ads. According to Amazon’s 2025 data, video significantly improves conversion rates. Video ads in Sponsored Brands and DSP campaigns, combined with video in your listings, create better engagement at both paid and organic levels.

Test creative more frequently. With Amazon’s new AI creative tools launched in October 2025, you can generate and test ad variations faster. Higher CTR and conversion rates from better creative improve both ACoS and TACoS.

Drive external traffic strategically. Amazon’s A10 algorithm prioritizes external traffic. Use social media, influencer partnerships, and the Brand Referral Bonus program to drive qualified external traffic that boosts organic ranking.

Expand your catalog. More products create more organic discovery opportunities and reduce reliance on any single product’s advertising. Catalog diversification naturally improves overall TACoS.

Current Advertising Benchmarks for 2025

Understanding where you stand relative to the market helps you set realistic targets. These benchmarks vary by product category, with highly competitive categories like supplements or electronics often seeing higher CPCs and ACoS.

Average metrics across Amazon:

• Cost per click: $0.99–$1.04 (seasonal range: $0.82–$1.14)
• Conversion rate: 9.96–10.33%
• ACoS: ~25–30% platform average
• Good ACoS for established products: 15–20%

By product lifecycle:

• Launch phase (0–3 months): 40–50% ACoS acceptable
• Growth phase (3–12 months): 25–35% ACoS target
• Maturity phase (12+ months): 15–25% ACoS target

These are guidelines, not rules. Your specific targets depend on margins, competition, and business goals.

Advanced Strategies for 2025 and Beyond

Creative Velocity Wins

Amazon’s October 2025 AI creative tools let you generate and test variations at scale. Winning advertisers in 2025 are running continuous A/B tests on:

• Ad images and lifestyle shots
• Headline variations
• Feature callouts
• Price presentation
• Promotional messaging

Test at least one new creative element every two weeks. Small improvements in CTR compound dramatically over months.

Video Ads Are No Longer Optional

With Prime Video reaching over 130 million U.S. customers monthly and Amazon’s expanded video ad formats throughout the marketplace, video is core to modern Amazon advertising funnels.

Use Sponsored Brands video to capture attention in search results. Amazon DSP video on Prime Video will help you reach shoppers earlier in their journey. Use product listing videos to improve conversion rates on the detail page.

The full-funnel approach (awareness via Prime Video, consideration via Sponsored Brands, conversion via Sponsored Products) creates better overall efficiency than focusing only on bottom-funnel ads.

Seasonal Planning with Current Data

Prime Day 2025 ran July 8–11 (four days), longer than previous years. Plan accordingly for 2026:

• 8 weeks before: Ensure inventory is in position
• 6 weeks before: Build deal submissions and increase organic ranking
• 4 weeks before: Scale budgets by 50–100% to capture early deal hunters
• During event: Monitor hourly and adjust bids multiple times per day
• 2 weeks after: Maintain higher budgets to capture extended halo effect

CPCs typically increase 30–50% during peak periods. Budget accordingly and accept temporarily higher ACoS during major events if it drives long-term organic gains.

The Daily Optimization Routine

• Monday: Review weekend performance and adjust budgets for the week
• Tuesday/Wednesday: Analyze search term reports and add negative keywords
• Thursday: Check placement performance and adjust placement bids
• Friday: Review competitive landscape and pricing
• Daily: Monitor ACoS and TACoS trends, but make decisions based on weekly patterns

Common Mistakes That Kill Profitability

Optimizing too frequently. Amazon needs 7–14 days of data for meaningful patterns. Making daily bid changes based on small data sets leads to constantly chasing noise instead of optimizing signal.

Ignoring organic lift. If you only watch ACoS, you might cut advertising that’s actually working. Always consider TACoS to see the full impact.

Using identical targets across all products. High-margin products can sustain higher ACoS. Low-margin products need tighter efficiency. Segment your campaigns by product profitability.

Never testing new keywords. Your current keywords get more competitive over time. Continuous keyword discovery through broad match campaigns feeds your long-term success.

Forgetting about seasonal patterns. Your optimal ACoS in January differs from your optimal ACoS in November. Account for natural conversion rate fluctuations throughout the year.

Neglecting listing quality. The best advertising in the world can’t fix a listing that doesn’t convert. Invest in images, A+ Content, and video before scaling ad spend.

Measuring What Actually Matters

Track these metrics weekly to understand your advertising health:

Campaign level:

• ACoS by campaign
• Click-through rate
• Conversion rate
• Cost per click
• Search impression share

Business level:

• TACoS trend (is it decreasing over time?)
• Organic vs. paid sales ratio
• Total revenue growth
• Profit margin after all costs
• Customer acquisition cost

The goal isn’t perfect metrics. The goal is profitable growth with sustainable unit economics.

Real-World Context: Market Reach and the Amazon Ecosystem

Understanding Amazon’s ecosystem helps you appreciate why advertising matters so much. According to Amazon Ads, Prime Video alone reaches over 130 million U.S. customers monthly, and 88% of those viewers shop on Amazon. When you combine marketplace ads with DSP video ads on Prime Video, you can reach customers throughout their entire decision journey.

This integrated ecosystem is what makes Amazon advertising different from other platforms. Awareness advertising on Prime Video can drive consideration within 24 hours when customers search on the marketplace. The tight connection between entertainment and commerce means your upper-funnel spend supports lower-funnel conversions more directly than on any other platform.

ROAS vs. ACoS: Speaking Everyone’s Language

Some teams prefer Return on Ad Spend (ROAS) instead of ACoS. They measure the same thing from opposite perspectives:

$$\text{ROAS} = \frac{\text{Ad Sales}}{\text{Ad Spend}}$$

A 20% ACoS equals 5x ROAS ($5 revenue for every $1 spent). A 25% ACoS equals 4x ROAS. A 33% ACoS equals 3x ROAS.

Use whichever metric your team prefers, but understand both because you’ll encounter both in industry discussions.

How Professional Management Changes Outcomes

Managing Amazon advertising effectively requires constant attention, sophisticated tools, and deep platform expertise. According to industry data from 2025, professional PPC management typically delivers:

• 15% average ACoS improvement
• 20% sales increases
• 71% year-over-year profit growth
• 3.91x ROAS

At Canopy Management, our partners see even stronger results (as of October 2025):

• 84% average year-over-year profit increase
• $3.3 billion in revenue managed
• 99.1% partner retention rate

These outcomes come from combining human expertise with proprietary optimization systems, continuous testing, and strategic planning most individual sellers can’t execute alone.

Your Next Steps

Start with these actions this week:

1. Calculate your actual break-even ACoS for each product
2. Review your current ACoS and TACoS to understand where you stand
3. Check search term reports and add negative keywords for obvious waste
4. Ensure your listing quality matches your ad investment
5. Set up weekly reporting on both ACoS and TACoS trends

The sellers who master these metrics don’t just survive on Amazon, they build genuinely profitable businesses. The difference between struggling and thriving often comes down to understanding what these numbers actually mean and taking systematic action based on them.

Amazon advertising in 2025 is more sophisticated than ever, but the fundamentals remain: spend efficiently on what converts, build organic momentum through advertising, and optimize continuously based on real data. Master ACoS and TACoS, and you control your profitability.

Need help optimizing your Amazon advertising?

Canopy Management specializes in turning advertising spend into profitable growth. Our team of former Amazonians and multi-million dollar sellers can help you master ACoS and TACoS optimization.

[Let’s talk about your Amazon strategy →]

Frequently Asked Questions About ACoS and TACoS

What’s the difference between ACoS and TACoS, and which one matters more?

ACoS shows you how efficiently your ads are converting. It tells you how much you spent on ads to generate one dollar of sales from those ads. TACoS shows you the bigger picture of how advertising fits into your entire business by comparing ad spend to total revenue (both organic and paid).

Here’s the thing: you need both. Use ACoS when you’re in your campaigns making decisions about keywords and bids. Use TACoS when you’re thinking about your overall business strategy and whether your advertising is actually building sustainable growth.

Think of it this way: you could have a 30% ACoS that looks expensive, but if your TACoS is only 10% because you’re generating tons of organic sales, your advertising is working incredibly well.

What’s a good ACoS for my products?

There’s no universal “good” ACoS because it completely depends on your profit margins. The real question is: what’s your break-even ACoS?

Calculate it like this: take your unit margin (what’s left after product costs and Amazon fees) and divide by your selling price, then multiply by 100. If you sell a $50 product and have $18 left after costs, your break-even ACoS is 36%.

For established products, aim for 15-20% ACoS. New product launches often run 40-50% ACoS while you’re building momentum. The platform average sits around 25-30%, but what matters is whether you’re making money at your specific ACoS level.

How do I calculate my break-even ACoS?

Take your selling price minus all your costs (product cost, shipping to Amazon, Amazon fees, storage fees). What’s left is your unit margin. Divide that margin by your selling price and multiply by 100.

Example: You sell dog toys for $25. Your costs break down as $10 for the product, $5 in Amazon fees, and $1 in other costs. Your margin is $9.

Break-even ACoS = ($9 / $25) × 100 = 36%

Anything below 36% makes you money. Anything above loses money. Your target should be below break-even with room for profit.

Why is my ACoS so high, and how do I lower it?

High ACoS usually comes from one of these issues: poor listing quality, irrelevant keywords, bidding too aggressively, or selling a product that doesn’t convert well.

Start by fixing your listing. If your listing doesn’t convert visitors into buyers, no amount of advertising will save you. Get your images, A+ Content, and copy right first.

Next, check your search term report weekly. Add negative keywords for anything irrelevant or low-converting. This stops you from wasting money on clicks that won’t buy.

Then adjust your bids based on what’s working. Increase bids on keywords bringing in sales below your target ACoS. Decrease bids on expensive keywords that aren’t converting.

What does TACoS tell me that ACoS doesn’t?

TACoS shows you if your advertising is building organic momentum or if you’re stuck on the paid traffic treadmill.

When TACoS decreases over time while ACoS stays the same, it means your advertising is working to boost organic rankings. You’re spending the same on ads, but your total revenue is growing because organic sales are increasing.

If your TACoS is stuck or climbing, you’re not building that organic flywheel. You’re dependent on paid traffic, which isn’t sustainable long-term.

What’s a good TACoS percentage?

It depends on your business stage. Here’s what we typically see:

New products or aggressive growth: 15-25% TACoS. You’re investing heavily to build momentum.

Growing brands with organic traction: 10-15% TACoS. You’re driving growth with ads but building organic sales too.

Established products: 5-10% TACoS. Strong organic presence with ads supporting rather than driving everything.

Under 5% TACoS means either you’ve got dominant organic rankings, or you might be underinvesting in advertising and leaving growth opportunities on the table.

How often should I check and adjust my ACoS?

Don’t over-optimize. Amazon needs 7-14 days of data to show meaningful patterns. Making daily changes based on small data sets means you’re chasing noise, not signal.

Check your metrics daily to spot major issues, but make bid and budget decisions weekly. Set up a routine: Mondays for budget adjustments, Tuesday or Wednesday for negative keywords, Thursday for placement bids, Friday for competitive analysis.

The exception is during major events like Prime Day or Black Friday, when you should monitor hourly and adjust multiple times per day.

What’s the relationship between ACoS and ROAS?

They measure the same thing from opposite angles. ACoS is cost-focused (what percentage of sales went to ads), while ROAS is return-focused (how many dollars of sales each ad dollar generated).

A 20% ACoS equals 5x ROAS. A 25% ACoS equals 4x ROAS. A 33% ACoS equals 3x ROAS.

Use whichever one your team prefers. Some people think better in terms of return multiples (ROAS), others prefer seeing costs as a percentage of sales (ACoS). Just know how to convert between them because you’ll hear both in discussions about Amazon advertising.

Should new product launches have higher ACoS?

Yes, absolutely. When you’re launching a new product, expect to run 40-50% ACoS for the first few months. This seems expensive, and it is, but you’re paying for two things: initial sales velocity and customer reviews.

The temporary high spend builds organic ranking. As you climb in search results, organic sales increase and your TACoS comes down even if ACoS stays elevated. After 3-4 months, you should be able to lower ACoS to 25-35%, then down to 15-25% as the product matures.

If you try to launch at a low ACoS from day one, you’ll struggle to build momentum and might never gain traction.

How do video ads affect my ACoS and TACoS?

Video ads typically have higher CPCs than text ads, which can temporarily increase your ACoS. But they create much better engagement and often drive more organic lift.

Prime Video reaches over 130 million U.S. customers monthly, and 88% of them shop on Amazon. When you run video ads on Prime Video (through DSP) plus Sponsored Brands video in search results, you’re hitting customers at multiple points in their journey.

The key is looking at TACoS, not just ACoS. Video builds awareness that leads to organic searches later. You might see a slightly higher ACoS on video campaigns, but your overall TACoS should improve as organic sales increase.

What are the biggest mistakes sellers make with ACoS?

The biggest one is optimizing ACoS without watching TACoS. You might cut advertising that looks inefficient based on ACoS alone, but that advertising could be driving organic growth that makes it incredibly valuable.

Other common mistakes: making changes too frequently based on limited data, using the same ACoS target for every product regardless of margins, never testing new keywords, ignoring seasonal patterns, and trying to fix bad listings with more ad spend.

The worst mistake? Not calculating your break-even ACoS. If you don’t know your actual profitability threshold, you’re just guessing.

How does seasonality affect my target ACoS?

Your optimal ACoS changes throughout the year because conversion rates and competition fluctuate. During Q4 holiday shopping, people are more ready to buy, so conversion rates go up and you can often achieve lower ACoS.

But CPCs also increase 30-50% during peak periods like Prime Day and Black Friday because everyone is bidding more aggressively. You need to accept temporarily higher ACoS during these events if they’re driving long-term organic gains.

Your January ACoS targets should be different from your November targets. Account for these natural fluctuations rather than treating every month the same.

What’s the daily optimization routine for managing ACoS?

Here’s what actually works based on managing hundreds of accounts:

Monday: Review weekend performance and set budgets for the week Tuesday/Wednesday: Dig into search term reports and add negative keywords Thursday: Check placement performance and adjust placement bids
Friday: Review your competitive landscape and pricing Every day: Monitor trends in ACoS and TACoS, but resist making changes based on daily swings

The key is consistent attention without overreacting to short-term noise. Weekly patterns matter way more than daily fluctuations.

How do I use match types to improve my ACoS?

Use all three match types strategically in coordinated campaigns. Broad match discovers new keywords you wouldn’t have thought of. Phrase match gives you control while still allowing some discovery. Exact match maximizes efficiency on proven winners.

Here’s the approach: start with broad match campaigns to gather data on what’s converting. When you find winners, move them to phrase match campaigns with higher bids. Your best performers go into exact match campaigns with your most aggressive bids.

This structure lets you continuously discover new opportunities while maximizing efficiency on what’s already working.

Should I use Amazon’s AI bidding tools?

Yes, but start conservatively. Amazon’s 2025 AI tools are significantly better than previous versions. They use machine learning to adjust bids based on likelihood to convert.

Start new campaigns with “dynamic bids (down only)” to protect yourself from overspending. Once you have data showing the campaign is profitable, test “dynamic bids (up and down)” to let Amazon increase bids when it predicts a conversion.

The AI works best when you give it clear signals through good listing quality and relevant keywords. Don’t expect it to fix fundamental problems with your product or targeting.

How does campaign structure affect ACoS?

Structure campaigns by product profitability, not just by product type. Keep high-margin products separate from low-margin products so you can set appropriate ACoS targets for each.

A high-margin product might be profitable at 35% ACoS, while a low-margin product loses money at anything above 20%. If they’re in the same campaign, you can’t optimize properly for either one.

Also separate campaigns by goal: aggressive campaigns for new product launches with high ACoS targets, efficiency campaigns for mature products with tight ACoS targets, and discovery campaigns using broad match to find new opportunities.

What metrics should I track beyond ACoS and TACoS?

At the campaign level, watch click-through rate, conversion rate, cost per click, and search impression share. These tell you why your ACoS is what it is.

At the business level, track your TACoS trend over time (is it going down?), organic versus paid sales ratio, total revenue growth, profit margin after all costs, and customer acquisition cost.

The goal isn’t perfect metrics. The goal is profitable growth with unit economics that actually work. If you’re making money and growing sustainably, you’re doing it right regardless of what industry benchmarks say.

When should I consider getting professional help with ACoS optimization?

When you’re spending more than a few thousand dollars a month on advertising, professional management usually pays for itself. The data shows that expert management typically delivers 15% better ACoS and 20% sales increases.

At Canopy Management, our partners average 84% year-over-year profit increases. That comes from combining human expertise with proprietary tools, continuous testing, and strategic planning that most individual sellers can’t execute alone.

The real question is: what’s your time worth, and could you make more money focusing on other parts of your business while experts handle your advertising? For most sellers doing over $30,000 monthly in revenue, the answer is yes.