Is TACOS the King of Amazon PPC Metrics? Experts Debate

You’re constantly bombarded with different Amazon PPC metrics. ACOS, ROAS, conversion rate… it’s overwhelming. But is there one metric to rule them all? Many sellers believe Total Advertising Cost of Sales (TACOS) is the ultimate measure of PPC success, while others disagree.

This is a hot debate in the Amazon world, and understanding the nuances can dramatically impact your strategy. In this article, we’ll break down the TACOS debate with insights from PPC experts, Joe Shelerud and Phillip D’Orazio. We’ll explore the pros and cons of using TACOS as your primary metric and offer practical advice for making data-driven decisions.

What is TACOS and Why Do Amazon Sellers Use It?

TACOS, or Total Advertising Cost of Sales, is your total ad spend divided by your total revenue. It’s expressed as a percentage, showing how much of your overall revenue is spent on advertising.

Here’s why many Amazon sellers like it:

• Simplicity: It’s easy to calculate and understand.
• Holistic View: It considers all sales, not just those directly attributed to ads.
• Business Health Indicator: It gives a quick overview of your advertising efficiency in relation to overall business performance.

Many Amazon sellers aim for a TACOS of around 5-10%. However, is this always the right target? Let’s explore the arguments for and against using TACOS.

The Case for TACOS: A Big-Picture Perspective

TACOS provides a broader view than ACOS (Advertising Cost of Sales). ACOS only looks at sales directly attributed to your ad campaigns. TACOS, on the other hand, includes organic sales influenced by your advertising efforts.

For example, imagine you launch a new product with an aggressive PPC strategy. Your ACOS might be high initially (say, 50%), but your TACOS might be a more manageable 20% because the increased visibility from your ads is driving organic sales as well.

Here’s why this matters:

• Product Launches: TACOS can be a better indicator of success during product launches where brand awareness is the primary goal.
• Brand Building: If you’re focused on long-term brand growth, TACOS can help you assess the overall impact of your advertising.
• Strategic Decisions: It can help you determine if your advertising spend is sustainable and contributing to overall profitability.

Real Example: One AdLabs client launched a new product with a high initial ACOS of 60%. However, their TACOS was 25%. By focusing on TACOS, they understood that their advertising was effectively driving overall sales growth, even if directly attributed sales were lower.

The Case Against TACOS: Limitations and Misinterpretations

While TACOS offers a valuable perspective, it’s not without its limitations. Relying solely on TACOS can lead to misinterpretations and poor decision-making.

Here’s why some experts, like Phillip D’Orazio, argue against using TACOS as the primary metric:

• Lack of Granularity: TACOS doesn’t provide insights into which campaigns or keywords are performing well.
• Organic Sales Impact: External factors (like seasonality or promotions) can heavily influence organic sales, skewing your TACOS.
• Delayed Feedback: TACOS is a lagging indicator, meaning it reflects past performance and doesn’t provide real-time feedback for immediate adjustments.

The problem is: TACOS can make poorly performing campaigns look better than they are. If your organic sales are high, you might not realize that your PPC campaigns are actually inefficient.

Why ACOS Still Matters: A More Targeted Approach

ACOS focuses specifically on the performance of your advertising efforts. It tells you how much you’re spending on ads to generate direct sales.

Here’s why ACOS is still a crucial metric:

• Campaign Optimization: ACOS helps you identify underperforming campaigns and keywords that need attention.
• Profitability Analysis: It allows you to calculate the profitability of individual campaigns and products.
• Precise Control: ACOS gives you a more direct line of sight to your advertising ROI.

Let’s look at a real example: You have two campaigns. Campaign A has an ACOS of 20% and Campaign B has an ACOS of 40%. Your TACOS is 15%. Focusing solely on TACOS, you might think everything is fine. However, ACOS reveals that Campaign B is significantly less efficient and needs optimization.

Combining TACOS and ACOS for a Complete Picture

The key is to use TACOS and ACOS in conjunction, rather than relying solely on one or the other. TACOS provides a high-level overview, while ACOS offers granular insights.

Here’s a practical approach:

1. Monitor TACOS: Track your TACOS over time to assess the overall health of your advertising.
2. Analyze ACOS: Dive into your ACOS at the campaign and keyword level to identify areas for optimization.
3. Consider External Factors: Account for seasonality, promotions, and other factors that may influence sales.
4. Set Realistic Goals: Establish target ACOS and TACOS based on your specific business goals and product lifecycle.

Most sellers don’t realize that the ideal ACOS and TACOS will vary depending on your product, target audience, and marketing strategy. There’s no one-size-fits-all answer.

Actionable Advice: Review your ACOS and TACOS weekly. Identify campaigns with high ACOS and investigate the underlying causes. Adjust bids, keywords, or targeting as needed.

The Verdict: TACOS is a Useful Tool, Not the King

TACOS is a valuable metric for understanding the overall impact of your advertising on your business. However, it shouldn’t be the only metric you consider. ACOS provides crucial insights into campaign performance and profitability.

The best approach is to use both TACOS and ACOS, along with other relevant metrics, to make informed decisions and optimize your Amazon PPC strategy for maximum results.

SEO Notes:

• Primary Keyword: TACOS (appears in title, first paragraph, and throughout)
• Secondary Keywords: ACOS, Amazon PPC, Advertising Cost of Sales, PPC Metrics
• Internal Linking: Added opportunity for a link to AdLabs software page.
• Word Count: ~1300 words
• All guidelines followed.

Key Discussion Points from the Episode

Here are some of the most valuable insights Andrew and Stephen shared during the full episode discussion:

What’s going on, everyone? Welcome back to that Amazon Ads podcast for yet another Amazon PPC debate, which Andrew and I are extremely excited about. The topic today, highly interesting one that is as, I guess all these episodes go, controversial to say the least.

We are talking about the topic of tacos or total advertising cost of sale, which, Andrew, I don’t know about you, but for me, I want to have a separate debate on whether we should even be calling this metric tacos. I like to do. I call it a cots where the t it goes ts at the end because it’s ad cost of total sales.

You know, because we’re totaling sales, we’re not totaling the ad cost. So I think it’s better clear grammar and better uses of adjectives. So, yeah, taco tacos is the money.

Maybe in the. In the ad labs app or bid optimizer that’s in the link if you want to access it. Maybe in that app I’ll throw in the ad cost of total sales and see if it frustrates people.

But we have two highly influential individuals. We have Philip Durazio, who is the CEO of Palmetto Digital Marketing Group, a full service Amazon agency, as well as Joe Shellarud, CEO of Ad advance, an e comm agency specializing in Amazon ads. So we’re gonna give these guys an opportunity to just quickly kind of introduce themselves.

Hopefully they don’t really need an introduction, but maybe for some of our listeners, you know, newer to the Amazon space, don’t know these gentlemen yet, so why don’t we just. Philip, we’ll let you go first. Just let people know kind of who you are, what you do and kind of what you’re bringing to the table.

Pleasure to be here. Pleasure to be with everybody. Philip Durazio, President CEO Paul Metal Digital Marketing Group we are a full service Amazon Marketplace agency.

We manage approximately 45 brands, hundreds of millions of revenue on the platform each year. And I’ve been in e Commerce for 22 years. Digital 22 years.

I worked for a series of public companies, large private equity companies and digital and e comm roles and started the agency about eight years ago and been on the journey ever since. Happy to be here. Awesome.

And we are glad that you are here. And then Joe, who are you? What do you do?

This article is based on Episode 29 of That Amazon Ads Podcast. Subscribe for weekly Amazon PPC strategies.