Is 23% a good ACoS?
Advertising Cost of Sale (ACoS) or Return On Ad Spend (ROAS) are probably the most important KPIs for retail media campaigns and as a store owner who sells Sponsored Product Ads (or other ad types) you need to be able to tell if your ACoS is good or not.
Before answering this question you need to decide what’s a good ACoS that works for the advertisers but also for you.
If your advertisers are getting 5% ACoS that’s great for them but very bad for you and it means that you could easily double your ad revenue while keeping your advertisers happy (with a 10% ACoS which is also great).
And what about 23%?
The ACoS that your advertisers get should be good, compared to the other advertising options that they have, which is why it’s important for you to know your competition (and to know the ACoS in the other retail media networks in your area). If the average ACoS in your region is 30% than 23% is great for the advertisers but once again, it means they might be willing to pay more and reach 25% (which is still below the ACoS they can get elsewhere).
At the end of the day, it’s not just about the competition and there is a limit to the ACoS that the advertisers are willing to pay. It needs to make sense.
There isn’t a one-size-fits-all answer to what that ACoS is. It depends on several factors specific to your advertiser’s business and campaign goals. Here are 4 factors that should be considered:
- Profit Margin: The product’s profit margin is crucial. If the margins are high, the advertisers can afford a higher ACoS and still be profitable. Conversely, with lower margins, they’ll need a lower ACoS to maintain profitability.
- Industry Benchmarks: ACoS averages can vary depending on the different retail media platforms and the product category. Generally, benchmarks range from single digits to over 30%. There are industry reports that can help you find the benchmark. You can look at Amazon ads and Google shopping ads benchmarks to get an idea.
For example, the average ACoS for Amazon Sponsored Product Ads is reported to be around 30% (according to the Amazon Advertising Stats – 2024 Update).
- Geographic Benchmarks: The advertising KPIs differ from one country to the other and so may the ACOS. It’s also a matter of how the retail media in the region has matured and developed, and how competitive it is.
- Campaign Goals: If you have a lot of brand advertisers that are aiming for brand awareness it’s different than if they are mainly looking for immediate sales. Building brand awareness justifies a higher ACoS for initial visibility, whereas driving sales might necessitate a lower ACoS for maximum return.
Here’s a general guideline:
- 15-20% ACoS is a good ACoS for established products with healthy profit margins.
- 25-40% ACoS is considered an average ACoS across various industries.
- 30% ACoS is the average ACOS on Amazon.
- Above 40% ACoS is a high ACoS and might indicate areas for improvement in your campaign optimization.
- Products in the Groceries, Beauty and health categories usually have higher ACOS.
Action items
Once you know what is a good ACoS for your advertisers across various categories, you can set floor bids for each category. This will allow you to maximize your ad revenue while keeping the advertisers satisfied.
You could also use it to set the best default desired ACoS for your automatic bidding campaigns.
Can we improve our earning while improving the ACOS for the advertisers?
Improved ACoS for your advertisers doesn’t necessary mean less revenue for you.
There is a very simple thing you can do that could achieve both – Lower the ACoS for your advertisers while increasing your ad revenue: Adding more ad space in better positions.
By doing that, the supply is going up, the CTR is going up (better placements), CPC is going down (more inventory to sell), More advertisers are getting impressions and clicks, ACoS goes down, total ad revenue goes up.
Read more here.
If you still have any questions about it don’t hesitate to contact us.
About Mabaya
Mabaya, a Criteo company, offers a white-label self-service retail media platform for online retailers and marketplaces that enables sellers and brands to bid in order to ensure their products are listed in premium locations in the online store.
The platform is integrated in more than 50 ecommerce sites around the globe (such as Bol.com, Jumia, Manomano, Kaufland, Falabella etc.), serving more than 80,000 advertisers and sellers.
