Over on the Lean Media blog, I’ve written a post titled Why you can’t trust ACoS metrics in Amazon Advertising (and two alternatives). Amazon Advertising (formerly Amazon Marketing Services) is the powerful self-serve advertising platform that vendors can use to advertise their wares next to Amazon search results, on Amazon product pages, and even on the lock screens for Kindle e-readers.
The problem with Amazon Advertising is the metrics are terrible. In the blog post I specifically noted the problem with “ACoS” (Average Cost of Sales) and even made a video that demonstrates how a seemingly innocuous ACoS rate may be hiding a money losing campaign. Other problems include poor reporting capabilities, including no easy way to compare a campaign’s performance from one period to the next. By comparison, Google AdWords certainly has its own problems with misleading small businesses about the locations of people clicking ads and click fraud, but at least it’s possible to do a deep-dive into AdWords metrics to compare campaigns and time periods.
What’s the solution to misleading ACoS metrics? As described on the Lean Media blog, I created two other indicators, ACoN (Average Cost of Net) and ACoP (Average Cost of Profit). The problem with these metrics, however, is they have to be manually created. Here’s a sample from the actual Google Sheets page that I use for the task:
Amazon could actually create one of the metrics with the data that it has. Average Cost of Net refers to net revenue remitted to vendors, so if the company swapped out “Sales” (gross sales on Amazon) with projected net revenues to the vendor, that would give a much better idea of performance.