ACoS and ROAS? Choosing the Right Metric for Amazon PPC

For years, Amazon sellers have relied primarily on ACoS (Advertising Cost of Sales) to measure their PPC campaign success. However, after Amazon emphasized another powerful metric—ROAS (Return on Ad Spend)—a critical question now puzzles sellers: Which metric should actually guide their decisions?

The fact is, each metric excels in different contexts. Selecting the right option hinges on your business growth stage, marketing goals, and PPC strategy. In this guide, we will clear up the confusion by exploring the unique strengths of each metric as well as when and why to use them, while giving you a decision-making approach that goes further than the basics.

ACoS vs ROAS in Amazon PPC: Key Differences

1.   Calculation Method and Interpretation

The primary difference between ACoS (Advertising Cost of Sales) and ROAS (Return on Ad Spend) lies in how each metric is calculated and interpreted.

Calculating ACoS

ACoS measures your advertising costs relative to the revenue generated from those ads. It indicates the profitability and efficiency of your Amazon PPC campaigns.

The formula is straightforward:

ACoS=(Ad Spend/Ad Revenue)×100

For Example:By spending $200 on ads, you earn $1,000 in sales. Then,

ACoS: (200/1000)×100=20%

There is no universal benchmark for an ideal ACoS as it depends on various factors like product margins, market conditions, and business scale. However, advertisers typically strive for the lowest possible number. A lower ACoS indicates a more profitable and efficient Amazon PPC campaign.

• When ACoS is less than 100%, it indicates that your advertising is generating more revenue than it costs
• An ACoS over 100% means you’re spending more on ads than you’re earning in revenue, indicating that your campaign needs urgent optimization.

Calculating ROAS

ROAS is essentially the inverse of ACoS. This metric shows the revenue you gain for each dollar spent on advertising, measuring your ad spend’s effectiveness.

The formula for ROAS is:

ROAS=Ad Revenue/Ad Spend

Example:

Continuing from the previous scenario—spending $200 and earning $1000—your ROAS would be:

ROAS: 1000/200=5

Every $1 invested in ads brought $5 in revenue. That’s a 5x return on investment.

A higher ROAS means your ads are doing better because you earn more money for every dollar you spend. Although benchmarks differ across industries depending on profit margins and product types, a ROAS of 4:1 is generally regarded as ideal. However:

• Lower-margin products typically require higher ROAS (such as 5:1 or above) for profitability.
• Higher-margin products can remain profitable even at lower ROAS levels (like 2:1 or 3:1).

2.   Strategic Focus

While related, the two metrics assess separate aspects of ad performance on Amazon. For example:

• ACoS:
  Primarily focuses on cost-efficiency and budget control – “What percentage of sales am I spending on advertising?

It emphasizes keeping your ad spend as low as possible relative to revenue.

• ROAS:
  Focuses on return perspective – “How many dollars am I generating for each dollar spent?“.

It encourages advertisers to think about how much they can scale revenue rather than only cutting costs.

When to Use ACoS as Primary Metric for Amazon PPC Campaigns

1.   When Profit Margins are Tight

If your products have low margins, closely managing your advertising costs is crucial to remain profitable. As ACoS shows how much of your sales go into ads, it helps control spending for low-margin products.

Why not ROAS?

ROAS only shows how much money you earn back from each dollar spent on ads, but it does not consider how much actual profit you make after covering all your costs. For products with low profits, a high ROAS could still mean you’re spending too much on advertising. As a result, your small profit could quickly turn into a loss before you notice.

2.   When You Want to Stay Profitable Amid High Competition

On marketplaces like Amazon, in highly competitive periods like the holidays, it’s essential to manage your ad spending closely to avoid losing money. ACoS helps you to monitor your spending so that your profits are not compromised.

Why not ROAS?

Since ROAS highlights sales generated, not the cost-effectiveness of your Amazon ad spend, it might push you to increase your budget just to keep up with competitors. This could lead you to spend too much without making enough profit.

3.   When You Want to Maintain Stability After a Growth Phase

After quickly growing your sales (like when launching new products) on Amazon, it’s important to start focusing on keeping your business profitable long-term. Using ACoS in Amazon PPC as a primary metric in these scenarios helps you see clearly if your ad spending remains within a profitable range.

Why not ROAS?

Continuing to use ROAS in Amazon PPC during this period might push you to chase more and more sales, even if the costs become too high. Once the growth phase ends, you could see a decline in profits.

4.   When You Have a Low Budget for PPC Campaigns

As ACoS shows you how much you’re spending on ads to make each sale, it is a better metric to consider when you’re working with a tight budget and need to remain profitable.

Why not RoAS?

RoAS focuses on maximizing revenue rather than profitability. Hence, it may allure sellers to spend more even if it means quickly exhausting your entire Amazon ad budget. This can leave you with no money left to advertise, preventing long-term planning or consistent performance.

Key Scenarios for Using ROAS as the Primary Amazon PPC Metric

1.   When the Goal is Revenue Growth and Market Expansion

If you aim to grow ROI on Amazon through PPC campaigns and capture more market share, ROAS is a more suitable metric to consider. It shows how much revenue you’re earning for every dollar spent, helping you scale up your campaigns.

Why not ACoS?

ACoS focuses on keeping costs low, which might make you cut back on spending—even when that spending could bring in more sales. This can curb your growth and confine your market reach.

2.   When You Are Planning to Market New Products Aggressively

New products often need extra promotion to get noticed on competitive marketplaces like Amazon. Using ROAS in Amazon PPC helps you measure if your ad spend is generating enough sales to support that push, even if profitability isn’t immediate.

Why not ACoS?

At the start, your ACoS will likely be high because the sales volume is still building. Using ACoS in Amazon PPC too early might discourage you from spending what’s needed to gain traction in the market.

3.   When You Want to Sell High-Margin Products

When you’re selling products with strong profit margins, you can afford to spend more on ads to boost revenue. ROAS indicates the revenue you generate without focusing too much on spending limits.

Why not ACoS?

ACoS might look high on paper, but with high-margin products, you can still be profitable. Relying too much on ACoS could lead you to cut back on effective campaigns that are actually profitable at a higher cost.

How to Leverage Both ACoS and RoAS in Amazon PPC for a Holistic View

While ACoS and RoAS have their distinct advantages, Amazon recommends that sellers should utilize both together in a strategic manner to get a comprehensive view of how your Amazon PPC campaigns are performing.

Here is how you can create a balanced approach for Amazon PPC campaign management:

1.   Use ACoS for Detailed Campaign Optimization

ACoS is excellent for closely managing your costs. It helps you identify which keywords, products, or ad groups are consuming too much of your Amazon advertising budget but giving less conversions. Once you have this data, it becomes easier for you to fine-tune or optimize Amazon PPC campaigns for better budget utilization.

Example: Amazon’s advertising reports break down ACoS by keywords, making it easy to identify under-performing ones. If a keyword shows an ACoS of 70%, but your profit margin only supports 30%, it’s a clear sign you’re overspending. In such cases, you can lower the bid, refine targeting, or pause the keyword entirely to improve overall campaign profitability.

2.   Use ROAS for Strategic Budget Allocation

ROAS is useful for seeing the bigger picture. It tells you which Amazon PPC campaigns are delivering the strongest return on your ad spend, helping you decide where to increase or reduce your investment across campaigns for maximum sales growth.

Example: A campaign has a ROAS of 6, while another has a ROAS of 2. You know the first campaign is generating $6 of revenue for every dollar spent, and the second one is generating $2 for every dollar spent. This makes the first campaign a better choice for additional budget allocation.

3.   Consider Both Metrics Within the Context of Business Objectives

• During new product launches, accept higher ACoS (lower ROAS) temporarily to build review velocity (how fast you gain customer reviews) and organic ranking.
• When facing increased competition, adjust your ACoS targets upward strategically to secure market share and brand position.
• Focus on achieving a low ACoS and a high ROAS to boost profitability.
• For older products with established organic ranking, prioritize higher ROAS (lower ACoS) to maximize profitability.

Adjusting both metrics based on your business goals helps balance short-term profit with long-term growth on Amazon.

That said, while these strategies can help you make smarter use of ACoS and ROAS, executing them effectively takes time and expertise. If you’re already juggling with store management tasks, it is better to hire dedicated professionals by outsourcing Amazon PPC management services.

Experienced Amazon advertising service providers not only monitor both ACoS and ROAS across different campaigns but also understand how to act on that data. They identify where your budget is being wasted, which keywords or campaigns are driving the best returns, and when to shift strategies based on changing goals. By using both metrics together, they help you optimize performance at both the campaign and account levels, aligning ad spending with business goals.

Key Takeaway

In the end, it’s not about choosing between ACoS and ROAS—it’s about knowing when each matters most. ACoS helps keep your spending in check, and ROAS shows how much you can earn. Together, they provide a complete picture of how your Amazon PPC campaigns are performing. Get assistance from experienced professionals to manage, optimize, and scale your Amazon PPC campaigns.