Amazon,Advertising Metrics
Having a solid Amazon Advertising strategy in place is a critical component for success, and one that involves regularly assessing how your campaigns are performing. Luckily, Amazon provides many metrics to help sellers and brands analyze ad efficiency.
However, the challenge lies in understanding what these metrics mean, how they are calculated, and how to use these figures to identify areas in need of optimization.
From CPC to CTR, ACoS to TACoS, and every term in between, we break down the 10 key Amazon Advertising metrics that you need to know to make sure you are driving the highest ROI on your ad dollars.
1. Impressions
Impressions are the number of times your ad is displayed, allowing shoppers to view it. While this metric is key, it is not an indicator of true success because it does not show how many shoppers found the ad useful. If your impression numbers are high, it means that the ad is getting a lot of exposure. You do not pay for impressions — only clicks — so the more impressions, the better, and it will not impact your ad budget.
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2. Clicks
Clicks are what you would expect them to be — the number of times potential customers have chosen to click on your ad. Each click comes with a cost, as Amazon charges advertisers per click.
3. Cost Per Click (CPC)
CPC is the cost you pay for each click your ad generates. It is calculated as your total ad spend divided by the number of clicks. As an advertiser, your goal is to beat competitors for the best ad position, and this is done by bidding the maximum cost you are willing to pay per click on your ad, which is referred to as your CPC bid.
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Regardless of how high you bid, you will only pay 1 cent more than the next-highest bid price for the same keyword. For example, if you bid $2 and the next highest bid was $1, your CPC would be just $1.01 even though the highest bid was $2. Of course, a lower CPC means a higher ROI.
4. Click-Through Rate (CTR)
CTR is a critical metric for assessing an ad’s performance. It varies based on the type of keyword, like branded versus unbranded search terms. The calculation formula for CTR is the number of clicks divided by the number of impressions.
A high CTR means your ad is getting the attention of shoppers, while a low CTR means not enough shoppers are finding your ad compelling enough to click on it, based on what they are looking for. That can indicate that your targeted keywords may need to be adjusted for more relevancy.
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5. Conversion Rate (CR)
CR is one measure of a campaign’s success. It indicates how many customers purchased your product after arriving at the product detail page. CR is calculated by the number of conversions (purchases) received divided by the total number of ad clicks. This metric can indicate the high relevance of your ad or product detail page. If this number is low, it can mean that improvements are needed to your keyword targeting or product listing.
6. Ad Sales
Ad sales, or ad revenue, is how much income your ad generated based on the total sales figures of purchases, or ad conversions. It is calculated by the amount of money received, including discounts, returns, and refunds, which is the gross income. Once costs and fees are subtracted, you can determine your net income.
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7. Ad Spend
Ad spend is the total amount of money you spend on advertising per day. It can also be measured and broken down by account, campaign, ad group, and keyword. Ad spend varies from business to business depending on what the advertising strategy is.
8. Advertising Cost of Sales (ACoS)
ACoS is the metric Amazon uses to measure advertising efficiency. It is calculated using ad spend divided by revenue multiplied by 100. ACoS is the ratio of ad spend to sales and indicates how well your ads are performing in relation to your ad spend. It is dependent on several factors, including your business goals, campaign structure, product life cycle, profit margins, and more.
A lower ACoS reveals that you are spending a smaller percentage of sales on advertising. Therefore, if your goal is to increase a product’s discoverability, a higher ACoS for a given period would be ideal.
It is essential to determine what net profit margin you are aiming for with each product, after ad spend, to figure out what each product’s target ACoS would be.
9. Return on Ad Spend (RoAS)
RoAS is also a measure of how effective your campaigns are in relation to your ad spend, but it is the inverse of ACoS. RoAS divides total ad sales by total advertising spend. A RoAS less than one is considered negative, and it can be applied to each campaign, ad group, ad, and keyword and rolled up against all ad spend to gauge profitability. Unlike ACoS, RoAS is displayed as a number interpreted as an index rather than a percentage.
10. Total Advertising Cost of Sales (TACoS)
TACoS measures ad spend in relation to the total revenue generated. It offers insight into your campaign’s overall performance and allows you to analyze how your advertising directly impacts your company’s growth and, more specifically, organic sales. To calculate TACoS, divide your total ad spend by total sales and then multiply by 100.
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TACoS differs from ACoS because it is more holistic and gives you a broader picture of revenue growth that stemmed from advertising. It is a true indication of how well your campaigns are performing based on your advertising ROI.
Final Thoughts
Understanding what each of these metrics mean and how they are calculated provides you with both a detailed and birds-eye view of a campaign’s performance. As there are various components to each campaign, including keywords, bids, and more, you want to examine each campaign’s performance regularly.
Ultimately, you want to ensure that your advertising dollars are being spent wisely and producing the desired results, whether that is expanded product visibility, higher conversions, or increased sales. Analyzing these metrics correctly also helps you identify where improvements can be made so that you can optimize your ads efficiently and effectively.
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