To explain why Sponsoreds believes that MACoS is a better measurement of Amazon PPC performance, let’s first recall why Amazon Sellers love ACoS so much.
ACoS is a simple and straightforward measurement tool. A single glance at this % can tell a Seller how well a Sponsored Ad is doing its job at promoting a product’s sales.
Basically, it’s the number of dollars spent on advertising per one dollar gained from sales (generated by said advertising).
Why is it so popular?
1 - It’s easy to read on any scale of PPC analysis (from total Advertising level - to a single keyword).
2 - it’s informative. ACoS allows a Seller to tell right away if any given marketing effort
generates or bleeds real money.
3 - it’s actionable. ACoS too high? A deeper dive into the troubled PPC campaign is due! ACoS too low? Perhaps bidding higher or increasing the PPC budget will secure you more sales than you’re getting at the moment.
And yet… We find ACoS isn’t a good enough measurement.
There are two problems with ACoS:
The first --> It accounts only for the sales generated by ads. However, that is not how Amazon’s algorithm itself works!
Look at another well-known, competitive Amazon metric: the BSR (best seller rank). Does having a good BSR help an ASIN to sell better? Absolutely! It allows that ASIN to show higher up in both Sponsored and organic search results. But does a BSR depend on advertising efforts? Only in part. BSR also depends on the volume of organic sales (if not more). A good BSR of a given ASIN means more sales and CTR/conversions for it, including that from the PPC traffic. And this… well, this the ACoS!
So we come to a point where ACoS turns out to depend on a set of values that can be barely influenced by how well a PPC campaign is run altogether.
The second --> Amazon is known for what’s called sales flywheel. Long story short: the more you sell - the even more you sell.
It works like this: extra sales get you a better BSR. The better your BSR is - the higher up the product is shown on both organic and sponsored results. The higher up your product is in search results - the more customers see your product. The more people see it - the more you sell. The more you sell… well, you got the idea. A flywheel.
So ACoS alone can’t really show us either the short or long-term effects PPC sales have on total product sales.
Once we realized this - it was clear that we needed an alternative way to gauge how well PPC marketing efforts resonate with ASIN’s sales, including beyond the PPC.
And this is how we arrived at MACoS, or the Macro Averaged Cost of Sales.
Basically, MACoS is very much like ACoS, but it takes into account the total volume of
Sponsored Ads spent - and the respective ASIN’s total (PPC + organic) sales for any given period.
This small adjustment to an ACoS has a dramatic impact on how well we can read product data. And it works best combined with old school ACoS. This combo lets us arrive immediately to some actionable hypothesis about what’s going on with sales.
If both ACoS and MACoS go up - this means that whatever changes were made to a PPC campaign, it made all sales more expensive. To retain the previous level of profit - you will need to bid down on the keywords with too high ACoS and cut on keywords that have a lot of clicks but zero sales.
Alas… you did not do anything to your PPC. If that is the case, a simultaneous increase in both ACoS and MACoS can be an indication of changes in the market itself that need further study to counter (for instance, this can happen at the end of high season for a seasonal product).
If ACoS goes up but the MACoS remains the same or goes down - this means that the flywheel effect for that product works well. Despite higher ACoS, meaning you spend more USD on ads for every USD earned, a lower MACoS means that the extra sales generated by those extra ads spend boosted product’s BSR. And that had a positive effect on overall sales, thereby totally making extra ads spent worth it! Etc.
Now, there is a problem with calculating MACoS. No existing Seller Central report can give you a MACoS value. To obtain it, you need to combine sales data from your Advertising Manager data - and the Business Report data on total sales.
This is not as straightforward as it seems. For instance - a PPC campaign might include more than one ASIN, while Business Report shows us data we need only on a by-ASIN basis.
But in the end, our developers came up with a few tricks to make this work. So that’s now “yes” - our customers can safely read MACoS values, as well as any other parameters for any given product. And thanks to that, we can now make more informed managerial decisions about how to run all Amazon PPC campaigns!
Let us know what is your MACoS in your Amazon FBA business. Shoot me a message 👉🏻👉🏻👉🏻