Understanding ACOS vs. ROAS: A Guide to Profitability

Learn the critical difference between ACOS and ROAS, how to price for profit, and why even a 10x ROAS can leave you broke.

This episode of the Simple and Smart SEO Show with guest Austin Becker is your new ad spend survival guide.

🎧 Listen Now: The Hidden Cost of High ROAS (ft. Austin Becker)

🌟 Podcast Summary

In this episode, Crystal Waddell and Austin Becker discuss critical topics on ACOS optimization. They highlight why profit margins matter more than revenue. Sellers on platforms like Shopify can learn how to stop losing money on ads.

📌 Key Topics Covered:

• What is ACOS and how does it differ from ROAS?

• Why a low ACOS means higher profitability.

• How to price your product to include ad costs.

• Strategies to reduce ACOS and eliminate wasted spend.

• Using collection pages and product videos for better SEO.

• The impact of competitors like Amazon, Target, and Walmart on your ad visibility.

  
  

👉🏽 Jump to Timestamps

• 00:07:14 – What is ACOS?

• 00:08:00 – ACOS vs ROAS

• 00:10:05 – Why Pricing Mistakes Kill Profit

• 00:13:00 – The $0-to-Profit Pricing Shift

• 00:18:00 – Use Video SEO to Compete with Amazon

  
  

🧠 TL;DR: What You Need to Know About ACOS Optimization

• ACOS = Ad Spend ÷ Ad Revenue (a lower percentage is better)

• ROAS = Ad Revenue ÷ Ad Spend (a higher multiple is better)

• They are inverse metrics: 10% ACOS = 10x ROAS

• A high ROAS does not guarantee profitability if your ACOS is elevated.

• Include negative keywords and optimize your bidding strategy to reduce ACOS.

• Set your ad budgets based on profit margins, not overall revenue.

• Optimize collection pages and use embedded product videos for improved campaign performance.

  
  

📊 What Is ACOS? (Advertising Cost of Sale)

ACOS = (Ad Spend ÷ Sales Revenue) × 100

If you spend $15 on ads and generate $100 in sales, your ACOS is 15%.

“ACOS tells you how much of your revenue is eaten up by ads—just like rent or payroll.” — Austin Becker

💡 Key Metric Tip: Use ACOS as you would any business expense. Aim for a lower ACOS than your profit margin to stay profitable.

🔄 ACOS vs ROAS: What's the Real Profit Metric?

Metric	Formula	Goal
ACOS	Ad Spend / Revenue	LOWER is better
ROAS	Revenue / Ad Spend	HIGHER is better

Example:

• ACOS of 20% = ROAS of 5x

• ACOS of 5% = ROAS of 20x (exceptional!)

“People get excited about a 10x ROAS, but they don’t realize they’re still losing money if their ACOS is too high.” — Crystal Waddell

💸 How to Calculate a Break-Even ACOS

To find your break-even ACOS, use the following formula:

Break-even ACOS = 100% – Profit Margin

For example, if your product’s profit margin is 30%, your break-even ACOS is 70%. Any spending above that results in a loss.

“Many great products fail because their owners never calculated this.” — Austin Becker

🧰 Strategies to Lower ACOS and Increase Profit

1. Use Negative Keywords

• Prevent irrelevant clicks that waste your budget.

• Check your search term report regularly.

• Example: Filter out searches for terms like “free” or unrelated product types.

  
  

2. Improve Ad Relevance

• Utilize long-tail keywords.

• Match product targeting to customer intent.

• Craft better ad copy that aligns with your landing page content.

  
  

3. Optimize Bidding Strategy

• Initiate campaigns with lower bids, then adjust based on performance.

• Examine campaign performance data to halt low-ROI ads.

• Allocate more budget to top-performing keywords.

  
  

4. Focus on Conversion Rate

• Enhance product listings with high-quality images.

• Emphasize the break-even price and shipping information.

• Leverage video content to build trust and engage visitors.

  
  

📦 Shopify + Amazon: How ACOS Optimization Impacts Both

Crystal and Austin stress that Shopify store owners often forget to account for ad spend—which can drastically impact profitability.

“I could have had a 10x ROAS and not made any profit! I doubled my prices overnight and made more money with fewer sales.” — Crystal Waddell

Whether you're selling on Amazon or directing traffic to Shopify, you need to protect your margins:

• Account for returns.

• Build in a profit buffer for various risks like bad hires or seasonal shifts.

• Keep ad spend to ≤ 5–10% of your product price.

  
  

📈 Beyond ACOS: How to Compete with Amazon in Search

✅ Add Videos to Product Pages

Embed YouTube videos with schema markup to enhance visibility in Google search results.

“Videos show up with thumbnails in search results. They’re more clickable.” — Austin Becker

✅ Optimize Collection Pages

Make it straightforward for visitors to browse by style, use case, or category—just like Amazon does.

• Ensure clear filters (e.g., “ankle socks,” “compression socks”).

• Allow for quick navigation from homepage to product page within three clicks.

  
  

✨ Pro Tip: Sell More When People Are Buying

Instead of forcing consistent sales throughout the year, capitalize during peak seasons such as:

• March (Spring Break)

• Prime Day (July)

• Black Friday/Cyber Monday

• The Holiday Season

  
  

“I used to fight for consistent sales. Now I prepare for sales spikes." — Crystal Waddell

✅ Frequently Asked Questions (FAQ)

Q: What is a good ACOS for Amazon sellers? A: Anything under 30% is considered good. Under 15% is exceptional, but this depends on your product margin.

Q: How do I calculate break-even ACOS? A: Subtract your profit margin from 100%. For instance, 100% – 25% margin equals a 75% break-even ACOS.

Q: Can I still lose money with a good ROAS? A: Yes. Even a 10x ROAS could leave you unprofitable if your ACOS is too high.

Q: How do I reduce wasted ad spend? A: Use negative keywords, eliminate irrelevant search terms, and optimize bids.

Q: Should I use ACOS or ROAS? A: Use ACOS—it’s more actionable for real business owners.

🚀 Ready to Stop Losing Money on Ads?

👉🏽 Ready for a small business support group that UNDERSTANDS your creative business? 👈🏽

If you’re tired of pouring money into campaigns that don’t convert—or worse, projects that make you look profitable when you're not—join the SEO Squad.

✅ Learn to maximize your profits based on margins through organic marketing.

✅ Build product pages that rank and convert.

✅ Get expert help with Shopify SEO, Amazon PPC, and more.

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