ACOS to ROAS: how to convert, and the margin check that decides if you're profitable

The conversion in one line

ROAS = 100 ÷ ACOS, and the other way round, ACOS = 100 ÷ ROAS. The two metrics describe the same campaign from opposite ends.

• ACOS (advertising cost of sales) is ad spend divided by ad-attributed sales, shown as a percentage.
• ROAS (return on ad spend) is ad-attributed sales divided by ad spend, shown as a multiple.

Spend $300 and attribute $1,200 of sales to it: ACOS is 25%, ROAS is 4.0. Same campaign, two names. Marketplace sellers tend to talk in ACOS and advertisers on search and social in ROAS, which is why the conversion comes up whenever a team and an agency mix the two. Neither is more correct.

ACOS	ROAS
5%	20.00
10%	10.00
15%	6.67
20%	5.00
25%	4.00
30%	3.33
35%	2.86
40%	2.50
50%	2.00
60%	1.67
80%	1.25
100%	1.00

An ACOS of 100% is a ROAS of 1.0: you spent a dollar to bring in a dollar of revenue, and the advertising ate all of it.

Converting is the easy part

Neither number says whether the campaign made money, because both are built from revenue, and revenue is not profit. What matters is how much of each sale is left to pay for advertising once the product and its delivery are paid for.

That share is your margin before advertising, and it is your break-even ACOS. Take the same ratio the other way and you get the break-even ROAS: 1 ÷ margin.

A worked example. A product sells for $40. The product itself, marketplace fees, shipping and payment costs come to $26, leaving $14 — a 35% margin before ads. Break-even ACOS is therefore 35%, and break-even ROAS is 1 ÷ 0.35 = 2.86.

Now run three campaigns on that product, each bringing in $1,200 of attributed sales. At 35% margin, $1,200 of sales carries $420 of gross profit before any advertising.

Campaign	Ad spend	ACOS	ROAS	Left after ads
A	$300	25%	4.00	+$120
B	$420	35%	2.86	$0
C	$540	45%	2.22	−$120

Campaign B is break-even, and it looks perfectly respectable on a dashboard. Campaign C has a ROAS above 2 and loses money on every sale.

The same ACOS is not the same result

A 30% ACOS sounds like one thing. On a product with a 55% margin it keeps 25 points of every sale as profit. On a product with a 25% margin it loses 5 points. This is why a single ACOS target applied across a whole catalogue is almost always wrong: it quietly funds the low-margin products with the profit from the high-margin ones.

Set the target per product, from its own margin.

Setting a target

Target ACOS is break-even ACOS minus the profit you want to keep. If the margin before ads is 35% and you want to keep 10 points, the target is 25% ACOS, which is a target ROAS of 4.0.

You can deliberately run above break-even for a while — launching a product, building up reviews, buying customers who will order again. That is fine as long as it is a decision with an end date rather than a drift. If the plan is that customers return, judge the campaign against lifetime value rather than the first order; the CAC calculator works that out.

ACOS versus TACOS

ACOS looks only at sales the platform attributes to your ads. TACOS divides ad spend by total sales, ads and organic together. If ACOS stays flat while TACOS climbs, advertising is covering for organic sales that are slipping, which a ROAS figure alone will never show.

What distorts both numbers

• Attribution windows. Each platform credits a sale to an ad if it happened within some number of days of a click or view, and the defaults differ. One purchase can be claimed by two platforms at once. Compare like with like: one platform, one window.
• Returns and cancellations. They often arrive after the report was pulled, so revenue-based ratios flatter recent campaigns.
• Blended campaigns. Branded search captures people who would have bought anyway and raises the average. Look at brand and non-brand separately.
• Costs outside media. Agency fees, creative production and tooling sit outside both formulas. A campaign at exactly break-even is a loss once they are counted.

Doing it by hand

1. Work out the margin before ads: (price − every per-unit cost) ÷ price. If the price you see includes VAT, take the VAT out first by dividing, not subtracting.
2. Break-even ROAS is 1 ÷ that margin as a decimal.
3. Compare your actual ROAS. Above the line is profit, below it is loss.

The ROAS calculator does all three steps and shows the gross profit left after ad spend. If you only know your markup rather than your margin, convert first: a 50% markup is only a 33% margin, and the margin calculator shows both side by side. For the same logic applied to a whole business rather than one campaign, see the break-even calculator.