RoAS / ACoS Calculator for Amazon

Digital marketing has a variety of metrics that help companies measure the effectiveness of their advertising campaigns. Two of the most important metrics are the Advertising Cost of Sale (ACoS) and the Return on Advertising Spend (RoAS). These metrics are particularly important in e-commerce and Pay-per-Click (PPC) campaigns.

Here you can calculate the ACoS and RoAS yourself based on advertising revenue and advertising costs:

What does ACoS mean?

ACoS, or Advertising Cost of Sale, is a metric used in online marketing to measure the efficiency and profitability of advertising campaigns. ACoS indicates what percentage of revenue was spent on advertising expenses. This metric is especially prevalent on platforms like Amazon Ads and helps sellers understand how much they are spending on advertising to generate one euro of revenue.

What does RoAS mean?

RoAS, or Return on Advertising Spend, is also a relevant metric for performance marketing, which, unlike ACoS, measures the profitability of advertising expenses. RoAS indicates how much euro in revenue is generated for every euro spent on advertising. This metric is applicable across industries and provides marketers with a clear picture of the direct financial returns from their advertising campaigns.

What is the difference between ACoS and RoAS?

Although ACoS and RoAS assess similar aspects of advertising efficiency, there is a fundamental difference in their perspective and calculation:

• ACoS measures the cost efficiency of advertising campaigns. A high ACoS value indicates that a large portion of revenue is spent on advertising, which suggests a less efficient campaign.
• RoAS, on the other hand, measures the yield efficiency. A higher RoAS value indicates that each unit of advertising spend generates higher revenue, which suggests a more effective advertising campaign.

Mathematically, ACoS is the reciprocal of RoAS and vice versa.

It simplifies to:

ACoS = 1 / RoAS

and

RoAS = 1 / ACoS

How is the ACoS calculated?

ACoS is calculated by dividing the total advertising costs by the revenue generated from advertising and multiplying the result by 100:

ACoS = Advertising Costs / Advertising Revenue * 100

This formula helps sellers understand what percentage of their revenue they are spending on advertising activities.

How is the RoAS calculated?

RoAS is calculated by dividing the revenue generated from advertising by the advertising costs:

RoAS = Advertising Revenue / Advertising Costs

This shows how effective each spent unit of money is in terms of generating revenue.

What is a good ACoS or RoAS?

The definition of a "good" ACoS or RoAS can vary depending on the industry, market, and specific goals of a company. However, the following guidelines generally apply:

• Good ACoS: A low ACoS is often desirable, as it indicates that the advertising costs make up a smaller proportion of revenue. An ACoS under 10% is considered low, between 10% and 30% as normal, and over 30% as relatively high. However, these values are very dependent on the industry. For example, ACoS values in the USA are often significantly higher due to higher competition. It's all relative. Also, a low ACoS is not necessarily better: a higher ACoS may mean a lower contribution margin per unit sold, but if the volume increase is disproportional, the advertiser could absolutely earn more.
• Good RoAS: Conversely, a high RoAS is desirable. A RoAS over 10 is considered very good, which means that every euro of advertising expenditure generates ten euros or more in revenue.

And what is TACoS (Total Advertising Cost of Sale)?

TACoS, short for Total Advertising Cost of Sale, serves to measure the impact of advertising expenses on a company's total revenue. Unlike ACoS, which only sets direct advertising costs in relation to the revenue generated from advertising, TACoS refers to total revenue, including the revenue not generated through advertising.

Calculation of TACoS

TACoS is calculated by dividing the advertising costs by the total revenue (not just the revenue generated through advertising):

TACoS = Advertising Costs / Total Revenue * 100

TACoS is particularly useful for companies that want to monitor and optimize their total marketing expenditures. It helps find the balance between direct sales promotion measures and general brand-building measures and shows how advertising expenditures affect total revenue.

Conclusion

ACoS, TACoS, and RoAS are all essential metrics that online marketers should use to evaluate and optimize their advertising campaigns. By understanding these metrics, companies can develop more effective advertising strategies that not only increase revenue but also optimize advertising expenditures. Ultimately, however, success.

In AMALYTIX, the Amazon Monitoring Tool, we automatically calculate RoAS, TACoS, and ACoS. Take a look!