**Target ACOS = Margin before Ad Spend (Break-Even ACOS) - Target Margin after PPC**

The ACoS metric and how it can be interpreted correctly is explained in more detail in this article (click here).

**Explanation:**

After subtracting all costs, the margin for the product in this example (without costs for PPC) is at 20%.

It is, therefore, possible to spend 20% of the revenue on ad spend without making losses.

Determining a Target ACOS thus depends on how much margin the product is targeting when PPC costs are included. In this example, it was decided the margin should be at least 5% so that the ACOS must not be higher than 15%. This is consequently the Target ACOS.