How to calculate the profitability of Amazon PPC ads
The ACoS is indeed a measure of the profitability of the PPC campaign, however, to calculate the true profitability of the product, along with the PPC campaign costs you’d also want to consider the entire cost structure of your product including the:
- the selling price of the product
- Amazon FBA fees (if it is FBA fulfilled)
- the manufacturing cost per unit
- the shipping cost
- the discounts offered
The profit value is dependent on the product and the profit margins are based on all the factors that we listed above.
If you are making a profit margin of 30% without the PPC campaigns, as long as you are not spending over 30% off your profit margin then you are breaking even from your PPC campaigns.
You wouldn’t want to run PPC campaigns if you are making zero profits isn’t it?
If your PPC campaigns are not working towards increasing your profits then you must either work on your PPC keywords or make better strategies for your PPC costs. If your sales rate increases along with an increase in the profit margin that's when you can call your PPC campaigns to be profitable.