Fran:
Welcome to the Clear Ads Podcast! You’re listening to Fran and Alex Pugh. As always, remember to subscribe so you never miss an episode.
Today we’re talking about a big topic — rising costs.
Advertising is getting more expensive and competitive. We’ll also be breaking down a key metric we often mention: TACoS.
Before we dive into that, let’s take a step back. What is ACoS?
Alex:
ACoS stands for Advertising Cost of Sales. It tells you what percentage of your revenue goes toward advertising. It’s always been one of the key metrics for measuring how effective your ads are.
Now, TACoS is similar — it uses the same formula — but instead of looking at just ad-attributed sales, it looks at your entire Amazon revenue.
So it’s your ad spend divided by total sales, multiplied by 100.
Fran:
Right. The idea is that TACoS gives you a bigger-picture view of how your ads impact your whole account.
If you’ve got a low TACoS, it means you’re not too reliant on ads. But if your TACoS is close to 100%, that means all your sales are coming from advertising — and that’s not a healthy sign.
Why is TACoS so important?
Alex:
It’s all about sustainability and profitability. TACoS shows how balanced your organic and paid sales are.
Sure, ACoS and TACoS look similar, but TACoS takes that extra step — it helps you see how your ads affect your overall profit, not just your ad performance.
If you can increase your total sales or reduce inefficient ad spend, you’ll naturally improve TACoS.
Fran:
Exactly. And as advertising managers — whether you’re doing it yourself or working with an agency — TACoS helps you get that global overview.
It highlights if you’re becoming too reliant on ads or cannibalizing organic sales. You might see great ACoS numbers, but if your TACoS is high, you’re probably overspending or not growing organically.
Alex:
That’s a good point. TACoS also gives us insights into what’s happening in the wider category.
If your costs suddenly rise, it could mean competitors are bidding more aggressively, targeting your keywords, or even running ads on your listings.
Fran:
Exactly. It’s not always about your own actions — it’s often about what’s happening across the industry.
Now, how does TACoS relate to PPC?
If your TACoS is climbing, that’s usually a sign that your ad spend is too high or your prices need adjusting. The simplest way to bring TACoS down is to reduce spend — but do it gradually, not all at once.
Alex:
Yes, and if your margins are too tight, you might even need to increase prices to maintain profitability.
Now let’s talk about the advertising landscape itself — the “Amazon world” part of this discussion.
Fran:
Right. Over the last few years — especially since the pandemic — advertising costs have soared. More sellers and big brands joined Amazon, and the marketplace became much more competitive.
During lockdowns, people shifted all their shopping to Amazon — groceries, household items, everything. And brands that never sold online before started selling there too.
Alex:
Exactly. Big-box stores and global brands entered the platform with huge budgets, changing the game.
On top of that, Amazon has introduced more sponsored placements — not just Sponsored Products, but “Highly Rated” sections, “Climate Friendly” badges, and more.
Many of these are paid placements, even when they don’t look like ads. It’s becoming a “pay-to-play” environment — organic visibility is pushed further down the page.
Fran:
That’s why ad spend keeps rising — there are simply more paid slots to compete for.
And that’s also why industry-standard TACoS targets have shifted.
A few years ago, 8–12% was considered healthy. Now, 15% is much more realistic for most brands.
Alex:
It also depends on what stage your business is in.
If you’re in growth mode, you’ll naturally see higher TACoS because you’re investing in customer acquisition.
If you’re in profit mode, you’ll aim to bring TACoS down.
It’s about understanding your goals — short-term versus long-term.
Fran:
Absolutely. And remember, if your TACoS is high, that doesn’t always mean something’s wrong. Sometimes you’re spending more intentionally to boost organic rank or brand awareness.
But if your TACoS is high and profits are falling, that’s when it’s a red flag.
Alex:
Exactly. You can improve TACoS in a few key ways:
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Audit your campaigns. Pause or reduce bids on poor-performing keywords.
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Reinvest that budget into the campaigns or ASINs that are driving the best results.
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Focus on conversion rates. If more clicks turn into sales, TACoS improves automatically.
Fran:
Right. And Amazon loves listings with high conversion rates. The better your conversion rate, the less you’ll pay per click — it’s similar to Google’s “quality score.”
So it’s not just about ad strategy — your listing optimization plays a huge part.
Alex:
Exactly. Now, which costs are affecting the industry the most?
Definitely CPCs — cost-per-click rates have gone up dramatically.
Part of that is due to major brands with deep pockets bidding on everything. They have massive marketing budgets, and if they don’t spend it, they lose it. So they bid aggressively — even on competitor brand names.
Fran:
Right. And that drives everyone else’s costs up.
We’ve even seen cases where big brands were bidding $20 on a competitor’s brand name — just to hold top placement.
Smaller sellers can’t compete with that, so you have to be strategic. Ask yourself: are you paying to be profitable, or are you paying to be visible and boost organic growth?
Alex:
Exactly. If your ACoS looks bad but your TACoS is strong — meaning organic sales are rising — you might still be in a good position.
Ultimately, profitability is what matters most.
Fran:
At what point would you stop advertising a product entirely?
Alex:
Only when you’ve truly exhausted all options — tried every keyword strategy, adjusted bids, optimized listings — and it’s still unprofitable.
At that point, it might be smarter to redirect spend to your higher-margin products.
Fran:
Yes, and that’s why it’s important to look at performance at the ASIN level. You might have a healthy overall TACoS, but one or two products dragging it down.
And don’t forget to keep improving listings — better content often revives struggling products.
Alex:
Exactly. And if manufacturing costs are rising too, look for new sourcing options. China isn’t the only place — some brands are moving to India, Mexico, or even local production to avoid long shipping delays and high container costs.
Fran:
Good point. Sometimes slightly higher production costs are worth it for shorter lead times and consistent stock.
Before we wrap up — let’s talk about pitfalls. What should sellers avoid when trying to bring TACoS down?
Alex:
Don’t make drastic changes. Reducing spend too quickly can crash your sales. Test one adjustment at a time so you know what actually worked.
Fran:
Yes, and watch your organic rankings. If you suddenly cut ads for a keyword you rank #1 for, you could lose that spot. Monitor and adjust gradually.
Alex:
Exactly. And when setting targets — don’t jump straight from 20% TACoS to 15%. Move slowly, maybe 1% at a time.
Fran:
Right. Look at longer date ranges too — 7-day, 30-day, even 90-day windows — to get a full picture. Seasonality plays a huge role, especially around holidays.
Alex:
And if all this feels overwhelming, that’s what we’re here for.
If your advertising is becoming less efficient or too costly, reach out to us at Clear Ads for a consultation.
Fran:
Perfect ending! Thanks for listening. Don’t forget to share this episode and subscribe so you never miss future discussions.
