If you’re managing Amazon PPC, you’ve probably heard about TACoS. (Or you should have)
Let me explain it in simple terms so it’s more than just another confusing acronym.
TACoS stands for Total Advertising Cost of Sale. It helps you understand how much your ad spending affects your overall sales and business growth.
Think of TACoS as a bridge between your ads and the health of your entire brand. ACoS (Advertising Cost of Sale) focuses only on how well you spend money on ads directly, while TACoS takes a broader view—it tells you how your ad spend impacts both paid and organic sales.
How to Calculate it
Say you were spending $1,000 a month on ads, and the total sales in your account were $10,000.
You would divide 1,000 but 10,000 giving you 10%
So now you know you’re spending 10% of your total sales on your ad budget.
What TACoS Tells You (And What It Doesn’t)
Due to this relationship TACoS is helpful to understand how ads impact overall profitability. It can give you a quick snapshot of your ad spend versus your total sales. For instance, if you spend $1,000 on ads and have $10,000 in total sales, your TACoS is 10%. This helps you see if your ad spend is sustainable.
You can do quick napkin math to see if your account is profitable after advertising spend. If your before-ads profit margins are 35% and you know you have a 10% Total ACoS
Then simply take 35% and subtract 10% which leaves you 25%.
This means after factoring in advertising spend you should have roughly 25% profits left over.
However, it’s important to note that the above calculation isn’t a detailed profit analysis. It doesn’t show hidden costs like Amazon fees, shipping, or inventory costs that could impact your profits. Use it as a benchmark or a guide.
TACoS vs. ACoS
Many Amazon sellers rely heavily on ACoS to measure their advertising success. While ACoS tells you how much you spend on ads to get AD sales, that’s only half the story.
But TACoS? This metric tells you whether your ads are helping your brand grow in a sustainable way.
- ACoS (Advertising Cost of Sale): Measures how much you spend on ads to generate sales that come directly from those ads.
- TACoS (Total Advertising Cost of Sale): Looks at ad spend compared to your total sales (including organic sales). It reflects whether your ad strategy is driving long-term growth.
How TACoS Reflects Brand Growth
Because Total ACoS(TACoS) is a ratio, if your TACoS percentage goes down one of two things are happening. Either you’ve lowered your ad spend (ad Total Sales have remained the same), or your spend has remained the same but Total Sales increase. Both VERY good things.
It means your ads are supporting brand growth. This means better profitability because you’re less reliant on ads to make sales.
On the other hand, if TACoS goes up, it means you’re relying too much on ads without seeing enough organic growth. This is a signal to revisit your ad strategy (and product listings).
Quick Wins vs. Long-Term Growth
Many Amazon sellers focus on short-term ad wins, but TACoS is about the bigger picture. Your ads should increase sales by driving organic page ranking, capturing greater market share. Ads should be part of a broader system that feeds your growth—not just a short-term solution to get sales.
The goal: Use ads to gain initial visibility, then let those sales drive up organic ranking and growth.
TACoS helps you see if that’s happening.
How to Use TACoS to Make Better Decisions
When analyzing TACoS, here are some key questions to ask:
- Is my ad spend driving organic growth?
- If TACoS is stable or decreasing, ads are supporting organic sales growth.
- Am I relying too much on ads?
- If TACoS is increasing, it means I’m spending more on ads without growing organic sales. This means it’s time to re-evaluate.
- What’s the big picture?
- TACoS helps keep your focus on the long-term impact. Are my ad dollars truly helping my brand grow sustainably?
Steps to Improve Your TACoS: Lower Ad Spend or Increase Sales
To reduce TACoS, you have two options: reduce your ad spend or increase your total sales.
- Lower Ad Spend: To reduce TACoS from 20% to 15%, pull back your ad budget while keeping the same total sales.
- Increase Total Sales: Alternatively, boost your total sales while keeping the ad spend the same. This helps lower TACoS by making ads a smaller portion of overall sales.
Wrapping It Up: Focus on Long-Term Growth with TACoS
TACoS isn’t just another metric—it’s a guide for your brand’s growth strategy. Watching TACoS helps make sure your ad dollars are creating sustainable growth, not just short-term wins.
Instead of asking “How’s my ACoS?” ask “What’s my TACoS telling me about the health of my business?” Your goal should be profitability that lasts—using ads as a strategic tool for growth, not a crutch.
Key Takeaways
- TACoS vs. ACoS: TACoS shows how ads affect your total sales, not just ad-driven sales.
- Measure Sustainability: A decreasing TACoS means healthier organic growth. An increasing TACoS may mean over-reliance on ads.
- Think Long-Term: Use TACoS to guide your ad strategy toward lasting brand growth—not just quick wins.