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What is ACoS?

Also known as Advertising Cost of Sale

ACoS is advertising spend divided by the revenue that advertising generated, expressed as a percentage. An ACoS of 25% means you spent $25 on ads for every $100 of ad-attributed sales.

Why it matters

ACoS on its own tells you nothing about whether a campaign is working. A 40% ACoS is comfortable on a product with 60% margins and ruinous on one with 25%. The number only becomes meaningful next to your break-even ACoS.

Break-even ACoS is identical to your gross margin percentage. If 35% of your selling price is profit before advertising, then spending 35% of that price on ads leaves you exactly nothing. Every point below is margin you keep.

The common mistake is comparing your ACoS to an industry average rather than to your own margin. There is no universally good ACoS, only one that is good for your unit economics.

Related

Terms that come up alongside this one

TACoS
TACoS is advertising spend divided by total revenue — organic and ad-driven combined — rather than by ad-attributed revenue alone. It shows whether advertising is growing the business overall.
ROAS
ROAS is revenue divided by advertising spend, expressed as a ratio. A ROAS of 4 means $4 of revenue for every $1 spent. It is the reciprocal of ACoS.
Break-even ACoS
Break-even ACoS is the advertising cost of sale at which an ad-driven sale produces zero profit. It is mathematically identical to your gross margin percentage.

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