ROAS = Turnover from your ads / Costs of your ads * 100%
Suppose you spend €500 on advertising costs in a month and your ROAS is €2,500:
€2.500 / €500 * 100% = 500%
ACOS = 100% * Cost of your Ads / Turnover from your Ads
In the previous example, you can conclude:
100% * €500 / €2.500 = 20%
Because advertisers generally use a ROAS target, Amazon also switched to reporting ROAS instead of ACOS results. This is even though an ACOS immediately gives you insight into how much per cent of your turnover you spent on advertising costs, and immediately gives you a good feeling about the amount of your advertising expenditure.
In practice, therefore, we see that people calculate the ROAS target back to a KPI comparable to ACOS because this gives them a better picture.
ROAS also has an exponential character. A ROAS of 1,500% seems to be very different from a ROAS of 2,000%, but actually, a step from a ROAS of 250% to 500% is a much larger step in terms of ACOS.
In the table below we have put several examples for ROAS and ACOS side by side:
Would you like to know more about the ROAS formula and how to calculate it? Then read the blog about the Understanding the ROAS formula and how to calculate it