Hey, Daniel here. Welcome to part two of the Amazon PPC course. In this part, we're going to go into more of the technical elements of Amazon PPC, and I'm really going to show you how to track your ads properly. And what to really optimize for, which is one of the most important, critical things in Amazon PPC, which basically everyone gets wrong. So you're going to want to see this because you haven't seen this before, but this is how to actually optimize your PPC because this is what matters. So we'll go into that here in just a sec. Now, if you haven't subscribed to my channel yet, I encourage you to do so if you're enjoying this course, because I frequently release content just like this, which can really help you succeed with your private label products on Amazon. So without further ado, let's just dive right in and hop on over to my computer.
Alrighty. So this time let's start with the most common mistake with Amazon PPC. In the previous video, we talked about the most common issue with Amazon PPC, but now let's talk about the most common mistake. And the most common mistake is optimizing Amazon PPC for the wrong outcome. So most sellers optimize their PPC for the wrong outcome. And this outcome tends to be low ACOS. Right? So most sellers are trying to accomplish a low ACOS with their PPC, but this is not the actual outcome you want, right? Because low ACOS doesn't really mean anything. You know, if you're getting a low ACOS and you're generating like a hundred bucks in sales per month, who cares, right? That's not the actual outcome. That's not the real reason you run PPC. The real reason you run PPC is not this. It is to make more money, right? Let's just be Frank. That's why you run PPC. And there's nothing wrong with that. That's the purpose of business. You know, the reason you have a business is to make money and that's just the truth. So the actual thing you want to optimize for the thing you want to optimize your Amazon PPC around the thing you want more of you know, through or from / because
of your Amazon PPC is to make more money. So it doesn't make any sense to optimize for a low ACOS because a low ACOS can actually make you less money than a higher ACOS. And the reason is that with a higher ACOS, you're definitely going to be able, like if you allow a higher ACOS you're definitely going to be able to get a lot more sales, you're going to have much higher sales volume.
And if you also make more organic sales on top of that and things like that, you grow your business. You can certainly make a lot more money with a higher ACOS. And I'm not saying you want to just have the highest possibilities. Yes. That's certainly not how it works. You want to find the right balance. And that's what I'm going to show you how to do in this video with the right metrics, with the right tracking. You want to find the ideal ACOS that makes you again the most money. That's what you want. This is about money, right? So let me show you how we make this happen, how we run our PPC to make us the most money possible overall. And that's the bottom line, right? So let's just go, go into the problem with ACOS a little bit deeper, because it's important for you to understand.
So you must understand that ACOS, the problem with ACOS, the reason why you don't want to optimize for ACOS itself is because ACOS does not factor in two critical elements of making more money. And the first one is simply sales volume. ACOS tells you nothing about sales volume. It just tells you how, um, it just tells you basically the cost on average, relative to the sales made on the PPC campaigns alone in isolation, right? So it is a very narrow metric. It doesn't factor in overall your sales and the impact of your PPC on both paid and organic sales. So it doesn't factor in sales volume either. It does not tell you how much sales you're making, right. It doesn't tell you anything about that. So it doesn't tell anything about sales volume and it doesn't tell you anything about organic sales either, right? So ACOS is just PPC campaigns related, right? Which is only PPC campaigns and only, uh, PPC in isolation. Doesn't tell you anything about the sales volume. It doesn't tell you anything about your organic sales, but that is a part of the equation. You know, what makes you money is... you know the sales volume we have with paid and organic and obviously how profitable it is. So I'm going to show you what we do instead, you know, how do we actually optimize for making money?
So the metric that more experienced savvy sellers oftentimes focus a lot on which is a lot better than ACOS is ACOTS, which is basically your ad spent divided by total sales, right sales overall on your account on Amazon. So again, I apologize for my writing. It's horrible, but hopefully you can still understand what it says here. At least I'm mentioning what it says. So ACOTS again, is ad spend divided by your total sales. So I'll put that in; total sales. And this is again, a lot better than ACOS because at least this tell this tells us more about the overall situation. It factors in the organic as well, which the ACOS doesn't do, right? So we're closer to what we want to optimize for. But the thing it is missing is another critical element of making money, which is sales volume, right? So it tells us how profitable we are on the ad spend overall for the business.
So if the ACOTS, you know, it's like 10%, this means that, you know, we might have, let's say a thousand bucks in ad spend and 10,000 in total sales. I might write this in here. 1k ad spent with a 10k in total sales. So if your gross margin is, let's say 30%, oops, like this, you know, it's pretty good. It's 20% net on this. And this is, you know, paid here paid spend, plus organic, right? So we've got paid. We've got organic as well. This tells us quite a lot, but again, it does not factor into sales volume, which is a big problem because when we factor that in as well, that's how we know how much money we actually made, because you can have a great ACOTS here, like in this case is pretty good for 10% ACOTS, you know, we have a 20% net margin.
It's pretty good. But again, if this made us, if this is like in a month, let's say, and we have, you know, it should be making a lot more. Uh, and so we only had 10,000 in total sales in a month. That's not good. You know, if you, if you, if you're to, to really be a bigger, and even if your ACOTS is 10%, this is not really like, you don't want to make 10,000 a month. You want to make a lot more than that. Right? So, so this doesn't tell us everything because you can lower your ACOTS. I think things are going in the right direction, but you actually make less in total sales and you make less money, which is not good, right. Frowny face. So let's go into how we actually do this properly. We actually figure out and optimize for Money Made in the business.
Now, with this being said, ACOTS is still a very useful metric. And once we know our ACOTS, we can actually figure out the money made. We can figure out the thing we want to optimize for and we can measure it. So the formula to measure money made at this level simply, you know, rough numbers. But, um, what helps us basically optimize ads is gross margin on the product minus the ACOTS. So you would have a percentage here, like 30% minus 20% gives us 10% times sales volume. So I'll just say total revenue. That's really what it is. Total Rev,
right? So total revenue, this is, this is the formula. This tells us how much money we made. Which is what we want to know? And this is what we want to optimize for in PPC. It is money made. So we balance our margin and ACOTS, this relationship with the total revenue, which is the money made. So let's say, um, our gross margin is 30%, ACOTS is 10%. This means we have 20% in net margin here, right? So we got 20% basically
here, um, times the revenue. So let's say the revenue is a 100k. Our net here, very simple math, but this helps us with PPC is, um, 20k net, right? 20k. Now this is good, right? In a sense, now we know what money made is we know this metric. And now the question is, how do we improve this? How do we actually use PPC to increase this number, to make more money?
Well, if you play out a few scenarios, you can see why this is so critical to understand, because in this case, you know, let's say the gross margin, let's take another example. Let's say the gross margin stays 30%. Um, but ACOTS goes up to 15%.
And so the net is lower. It's 15% in this case, but our total revenue goes up to 150k. Now just rough, roughly you can do this math to verify, but in this case, yeah, so in this case, we actually made 22.5k. So we made more money, right? So we actually raised our ACOTS, but because our total revenue grew, we made more money and even suppose you know the ACOTS, let's take another example. This is the same again, 30%. um, so a less extreme example. And let's say the ACOTS only grew by 2%. So we have, uh, 18% here. Revenue also grew to 150k and a slightly higher cost overall, but our revenue grew a lot. So in this case, we made 27k so you can see how this works. We actually raised our ACOTS, but because our total revenue grew so much, we make quite a lot more money. So lowering the ACOTS is not always the right thing, the same applies of course with ACOS, right?
But you can see how just looking at the ACOTS is actually misleading because you might just try to lower it and lower and lower it. And you end up making less money while if you raised it because you're scaling your ads, you might make more money. So I'm not going to go through the other scenario, but I'm sure you can understand how that works. So let's say our ACOTS actually went down to like 5%, but our revenue was cut in half, you know, so it's 50k. Well actually let's just draw that out. So again, margin stays the same 30%. Um, and our ACOTS went down to 5%. And so now our net here is fantastic, like 25% awesome, but our revenue went down, got cut in half. So it was only 50k. Well, now we're just making 12.5 k but it's a much better net margin and a lower ACOTS, but we make a lot less money.
So this is why we have to use this formula to understand actual money made. And that's what we want to increase. So when we know this, these numbers, we can actually know where we are at the sweet point in PPC. You know, where do we have the level of expansion balanced by the cost obviously ACOS is a part of this, but balanced by our actual cost of advertising. Uh, and this includes also the paid to organic ratio, everything we need to, to look at anything, everything that is important that actually impacts money made is factored into this. So this is all we know where we find that perfect sweet spot of balance between expansion of our PPC plus organic performance
And where we actually make the most money, which is ultimately what you want. That's what we want to optimize for. You wante this number to go up. And again, the point of PPC is not to have a lower ACOS or a lower ACOTS, it's to make more money. So now, of course the question is what to do. How do we actually, how do we actually improve money made because we just covered the tracking of it, right? How to understand what's actually happening, but how do we actually move this up? Well, there's a few things. First thing you need is certainly the right kind of tracking, accurate tracking of the right metrics. And we can call these KPIs, which we do for advertising ad KPIs. And when you have the right kind of tracking the right metrics, you're able to navigate in the right direction, you're able to take specific action to move specific numbers in the right direction while maintaining a healthy balance and actually ending up, making more money.
So this now includes a few different, important things, and they ultimately all have to do with either your PPC performance, or now we go into the ads and how effective they are, how well optimized they are, et cetera. Plus it has to do with what we refer to as SEO, which is essentially organic performance, right? So we have to track what impacts our PPC, how our PPC is performing and how we can improve the performance. So we get more and more for each dollar spent on PPC in terms of ad revenue. And we also need to monitor, uh, the specific things that are more SEO related that impact how much organic traffic, how good our rankings are and things like that come in addition to the PPC. So I'll mention a few things here where it's, you want to focus on to actually make more money and now this starts to make a lot more sense. So this is usually what you hear about is these individual things as the main thing, but these are the things that are, um, that are underlying the thing that actually matters with is again, how much money you make. So now we have, um, again, things like campaigns with PPC and, uh, targets... Campaigns, targets, and we'll cover this stuff in the next video, more specifically, how to scale your ads, uh, but all basically PPC stuff. Right?
And then we also have the SEO stuff, which is things like, um, keyword prioritization in your listing keyword pri... Keyword prioritization, indexation of keywords... Index. Uh, it has to do with like page interactions. Uh, it has to do with things like conversion rates and things of that nature. So, um, by improving these fundamental things,
like our campaign structures, uh, the targets ah obviously optimizing it, you know, making the spedt more efficient, which I said is basically our PPC production, how we run our PPC plus improving things like how we optimize the listing with keywords. You know, if you have keywords performing well in PPC, we want to give a lot of weight to them in our listing. So we rank more, um, we want to make sure everything is indexed that we want to rank for it properly. Uh, we want to make sure our, our listings are engaging. They get a lot of page, um, interactions and engagement on the page because that helps us rank better. And we want to make sure the offer converts because that's going to help us rank better as well. So, um, now these are the things together that will improve both PPC and SEO, which then ultimately produces more money made.
But the only way to understand what's going on, and if you're moving in the right direction is to track properly is to have accurate tracking. So we know that what we're doing is actually improving things, because sometimes you do something that improves a metric, but then it ends up harming other metrics and ultimately you make less money. So it's all to do with having the right tracking, knowing cause and effect, understanding exactly how the changes you're making impact performance and knowing exactly what to, uh, what to work on, what to improve, to move the needle on money made and move that up. So I'll say et cetera here, because there actually is a lot more in here that is important, but we don't have time to cover all of that in this video cause that literally takes hours and hours to go through in detail. And it requires really good systems and again, the right tracking system as well, to make sure you can actually do this and end up making more and more money because off Amazon PPC.
I hope you enjoyed part two of our Amazon PPC course. And you understand the real number, the real outcome you want to optimize for in Amazon PPC. Now, if you enjoyed this video, you're going to want to catch part three as well, because that's when we're going to talk about how to actually scale your ads and scale your business through Amazon PPC, which is an incredibly powerful tool by far the most powerful marketing mechanism. And we're really going to dive in on the things that matter when it comes to scaling with Amazon PPC and how to do that, the methodology we use. Now, if you enjoyed part one and two, then I encourage you do subscribe to my channel. Because again, I release more videos like this frequently, which you probably want to see as well, because they can really help you in your business.
And also if at this point you are feeling like this is really the information you've been missing to get results or get better results with your PPC on Amazon. Then I'm going to place a link below this video where you can actually book a free consultation with me and we can have a look at your business and your PPC and your situation. And I'll tell you what I think. And I'll let you know if I think our systems, our structures, our tracking, our proprietary tools and processes can help you to actually grow your business through PPC, get better results, um, and make more money right with PPC. So if you want to do that again, the link will be below this video and we'll sit down, just have a casual conversation and I'll let you know what I think. And I'll let you know if it can help you.
And then if so, what sort of results you can expect? So the link to book a call with me will be below this video. Also, we have a free case study. If you want to see more information around this and, and sort of the systems that matter in Amazon PPC and your Amazon private label business, I'll place a link to our free case study as well below the link to book a call. So you have those two options. And also if part three is already out, I'll have that here on the screen. So you can click that and go, what's part three of this three part free course, and I'll see you there or on a call or whatever you want to do, but I hope you enjoyed this and talk to you again soon.