MACoS and ACoS — understanding of an effective PPC

Profit Whales Team on Jul 03, 2020

“ACoS is a simple and straightforward measurement tool. A single glance at this percentage can tell a seller how well a Sponsored Ad is doing its job at promoting the product’s sales.

Basically, it’s the number of dollars spent on advertising per 1 dollar gained from sales (generated by the certain advertising).”  

– Alex Nyezhnyk, co-founder of Profit Whales

 

The purpose of ACoS

A part of understanding the potency of ACoS is defining its strong and weak sides.

The advantages:

  • ACoS is easy to read on any scale of PPC analysis (from total advertising level to a single keyword)
  • ACoS is informative because it allows determining the marketing effort and the profit margin
  • ACoS is actionable because when it is too high a seller dives deeper into the troubled PPC of the campaign to analyze the problem, on the other side, when ACoS is too low sellers consider bidding higher or increase the PPC budget to get more sales

The disadvantages: 

  • ACoS accounts only for the sales generated by ads, however, Amazon´s algorithm does not work this way

As an example, it will be informative to look at another well-known competitive Amazon metric – the BSR (best seller rank). A good BSR helps an ASIN to be sold better and allows it to rank higher in both Sponsored advertising and organic search results. 

On the other hand, BSR depends on advertising efforts only partly and partly on the volume of organic sales. A good BSR of a given ASIN means more sales and better conversions including the PPC traffic. And that is ACoS.

Here is a point where ACoS turns out to depend on a set of values that can be barely influenced by the PPC campaign work.

This Case Study proves the importance of PPC advertising.

  • Amazon and flywheel sales: more sales generate even more sales

Extra sales make a better BSR. The better is BSR the higher the product is ranked on both organic and sponsored ad results. The higher is the product in search results – the more customers see the product. The more people see it – the more sales business gets. This is how the flywheel works. 

So, ACoS alone can’t show whether the short or long-term effect PPC sales have on the total sales.

It is clear that Amazon sellers needed an alternative way to gauge PPC marketing efforts with ASIN’s sales including the results beyond the PPC. Here is where MACoS comes in handy. 

 

MACoS or the Macro Averaged Cost of Sales

Basically, MACoS is very similar to ACoS but it takes into account the total volume of Sponsored Ads spent and the respective ASIN’s total (PPC + organic) sales for any given period.

MACoS is built from a small adjustment to an ACoS, but it has a dramatic impact on how informative the product data can be. And it works the best combined with ACoS. This combo lets sellers arrive at some actionable hypotheses about the sales results.

ACoS and MACoS go up — sales are more expensive

To retain the previous level of profit, sellers need to bid down on the keywords with high ACoS and cut out keywords with a big number of impressions and zero sales.

 

In case the seller did not do anything with the PPC campaign, a simultaneous increase in ACoS and MACoS can be an indication of changes in the market with a further study.

 

ACoS goes up, but the MACoS does not change or goes down  the flywheel effect for the product works well

A higher ACoS means that the seller spends more USD on ads for every USD earned. A lower MACoS means the extra sales generated by the extra ad spend boosted the product’s BSR and that had a positive effect on overall sales.

Unfortunately, calculating MACoS is not that simple. No Seller Central report can give information about MACoS value. To obtain it, the seller needs to combine sales data from the Advertising Manager data and the Business Report data on total sales. 

But even this is not as straightforward as it seems. For instance, a PPC campaign might include more than one ASIN, while Business Report shows the data only on a by-ASIN basis. 

 

To summarize, ACoS is an informative and actionable metric, it provides sellers with data that helps to understand how to bid on keywords. Nevertheless, ACoS has some flaws and luckily, they can be covered with some strong points which MACoS inherent. The best results can be achieved with a combo of ACoS and MACoS.

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