ACoS is not everything.

What do we mean?

In simple words, advertising cost-of-sales (ACoS) shows the performance of your PPC campaigns. It compares the amount per dollar spent and earned from the campaigns.

In most cases, ACoS was the ultimate KPI metric in the past. I thought it was the most important, too. But things have changed.

After a granulated analysis of the keywords and the search terms we were getting, we saw that the ACoS by SKU and by individual keywords make more sense. We didn’t stop with this conclusion.

Diving more deeply into our clients’ key strategies, we noticed that the True-cost-of-sales (TACoS) is more critical than ACoS.

Why?

Even though good KPI metrics are a significant part of your advertising performance, your brand’s healthy growth is crucial in the long-term perspective. That being said, the importance is where you spend your budget.

You might “sacrifice” profitability for particular keywords or products in the short term, and your ACoS might be higher.

However, this doesn’t mean you perform poorly in the long term. It means your brand can win more visibility and popularity than your competitors, thus ranking higher organically.

You “sacrifice” profitability for specific keywords, but the budget is spent well.

We also see ACoS being deflated by brand targeting or organic sales cannibalization. You might hit the first ToS placements and spend much more on advertising, affecting your organic sales.

The key metrics we focus on now are:

• Organic vs. advertising sales ratio
• TACoS

The main metrics we focus on with our clients are:

• Top Length Revenue (TLR)
• Bottom Length Profit (BLP)
  
  

Regardless of your ACoS, if you are in the stabilization phase, these 2 metrics show whether your ads have good performance. It consists of increasing your organic rank and getting profitable and unprofitable sales. On their side, they are an investment in your organic ranking.

Since we are not measuring the success of a brand by ACoS, the results are not deceitful. The growth is healthy, and we can easily build long-term strategies.