ACoS vs TACoS vs Net Margin: Which Number Actually Tells You If You Made Money

Three numbers dominate conversations about Amazon advertising: ACoS, TACoS and net margin. They are often quoted as if they were interchangeable. They are not. Each answers a different question, and confusing them is one of the most common reasons sellers believe their ads are working when the business is losing money.

ACoS: how efficient are the ads themselves?

ACoS (advertising cost of sales) is ad spend divided by the sales attributed to those ads.

ACoS = ad spend / attributed ad sales

Amazon defines it in its own ACoS guide. If you spent $500 on Sponsored Products and Amazon attributed $2,000 of sales to those clicks, your ACoS is 25%.

ACoS is useful for comparing campaigns, ad groups and targets against each other. It tells you nothing about sales that came without an ad click, and nothing about your costs outside advertising.

TACoS: how heavy is advertising relative to the whole business?

TACoS (total advertising cost of sales) is ad spend divided by total sales, organic and paid together.

TACoS = ad spend / total sales

Using the same $500 of spend, if total sales for the period were $6,000, TACoS is 8.3%. TACoS is not an official Amazon console metric, so you usually calculate it yourself from the ads console and your sales report.

TACoS answers a business question: what share of every revenue dollar is going to advertising? If TACoS rises month after month while total sales stay flat, ads are replacing organic sales instead of adding to them.

Net margin: did you actually make money?

Net margin is what is left after every cost, divided by revenue.

Net margin = (revenue - fees - ad spend - landed COGS - refunds - other costs) / revenue

This is the only one of the three that tells you whether the business made money. A low ACoS and a healthy TACoS can still sit beside a negative net margin if your fees or product costs are high.

A worked example (illustrative numbers)

Consider one product for one month. These figures are invented to show the arithmetic.

• Total sales: $10,000 (400 units at $25)
• Attributed ad sales: $4,000
• Ad spend: $1,000
• Amazon referral and FBA fees: $3,300
• Landed cost of goods: $3,600
• Refunds and other costs: $500

ACoS = $1,000 / $4,000 = 25%. TACoS = $1,000 / $10,000 = 10%. Net profit = $10,000 - $3,300 - $1,000 - $3,600 - $500 = $1,600. Net margin = 16%.

Now suppose the seller raises bids to grow. Ad spend becomes $2,000, attributed ad sales become $6,000, and total sales become $11,500 (460 units). Fees and costs scale with units: fees about $3,795, COGS about $4,140, refunds and other about $575.

ACoS = 33.3%. TACoS = 17.4%. Net profit = $11,500 - $3,795 - $2,000 - $4,140 - $575 = $990. Net margin = 8.6%.

Sales went up 15%. Profit fell 38%. ACoS rose, but a 33% ACoS can still look normal next to industry chatter. Only net margin shows the real cost of that growth.

The most common mix-up: comparing ACoS to margin before ads

The cleanest way to use ACoS is to compare it to your break-even ACoS: the ACoS at which an ad-attributed sale earns exactly zero profit. Break-even ACoS equals your margin per unit before advertising. In the example above, margin before ads is ($25 - $8.25 fees - $9.00 COGS - $1.25 refunds and other) / $25 = 26%. Any target running above 26% ACoS is losing money on each ad-attributed sale.

We walk through the calculation step by step in how to calculate break-even ACoS.

Why "a good ACoS" is the wrong question

You will see averages quoted for ACoS across categories. They are useful for context and useless for decisions, because they say nothing about your fees, your landed cost or your price. A 20% ACoS is excellent for a product with a 45% margin before ads and a loss for a product with a 15% margin before ads.

The same is true in reverse. Our co-founder's own account, described in the Mr. Kics case, reached a 30-day ACoS of about 22% while its break-even ACoS was 15.5%. On paper that is still above break-even at the ad level, yet the business was profitable overall because ads were 8.9% of total sales (TACoS) and organic sales carried the rest. You need all three numbers to read that situation correctly.

How to use the three together

• ACoS against break-even ACoS, per product and per target: is this ad spend paying for itself?
• TACoS over time: is advertising becoming a heavier share of the business?
• Net margin monthly: after everything, did we make money, and is it trending the right way?

A simple rule of thumb: decide on targets using ACoS versus break-even, decide on budgets using TACoS, and judge the month using net margin. If you are setting budgets, our guide on setting an ad budget around your margin shows how.

Where Sollo Central fits

Sollo Central shows ACoS per product next to its break-even ACoS, TACoS for the account, and daily net profit in the same view, so you do not have to reconcile three tools to answer one question. When it proposes a bid or target change, the proposal states which of these numbers it expects to move and by how much. You approve or decline.