Why Is Your Amazon Ads ROAS Below 1, and What Fixes It?

The weekly ads report lands on Monday. Your brand spent more on Amazon Ads last month than those ads sold, and the number in the corner reads 0.7. Your team says the campaigns are still learning. Your finance director wants to know how much longer those losses will continue.

A ROAS below 1 is a signal, and it tells you where to look. Either a handful of products and search terms are eating the budget, or a listing gets clicks and loses the sale. Both can be found in your own reports within a week, and both can be fixed before you spend another month at a loss.

Why is your Amazon ads ROAS below 1?

Your Amazon ads ROAS is below 1 because the ads cost more than the sales Amazon attributes to them, and the usual causes are budget spent on searches that rarely buy, products that cannot win the click against cheaper rivals, or listings that do not convert the clicks they get. Rarely is it one bad setting.

Amazon Ads defines ROAS as ad revenue divided by ad spend, and ACoS, the advertising cost of sales, as its inverse expressed as a percentage. A ROAS of 0.7 is the same as an ACoS of about 143%. For every dollar you put into ads, 70 cents of sales came back.

On Sponsored Products, the ads that show your product in Amazon's search results, you pay for each click, and you can let Amazon's systems pick the searches automatically or choose the keywords yourself. Amazon's own targeting guide treats automatic campaigns as a source of keyword discovery. Left alone for months, they keep paying for loose matches that never turn into orders.

If your account runs only automatic campaigns, or the same budget across every product, you have found your first lead. So start with the plain question your report can answer. Write down which three products took the most ad spend last month, and what each one sold from ads.

What ROAS do you actually need to break even?

The ROAS you need to break even is one divided by the share of the price you keep after product cost and Amazon's fees, before any ad spend. For most products, that number sits well above 1.

Take a product that sells for $20. After the factory cost, freight, duty and Amazon's referral and fulfillment fees, suppose you keep $6 before ads, which is 30% of the price. At a ROAS of 1, a $20 ad sale costs $20 in ads, so you lose $14 on it. You only break even on ad sales at a ROAS of about 3.3. Amazon Ads makes the same point in its own guide, which says that to keep a profit your ACoS has to stay below your profit margin.

That is why "above 1" is the wrong target. Each product has its own break-even ROAS, set by its own margin, and a target only means something next to that number. Our guide to when a new Amazon US brand breaks even shows how the margin before ads is built.

There is one more number to watch. Ad ROAS counts only the sales Amazon credits to an ad. Total ROAS, your product's total sales divided by its ad spend, tells you whether the whole product earns its ad budget, including the organic sales that ads help to lift. Write both down for each product, next to its break-even ROAS.

How do you find where the ad money goes?

You find where the ad money goes by sorting spend by product, then by campaign, then by the search terms shoppers actually typed. The search term report lists the searches shoppers typed before clicking your ads, with what each one cost and whether it led to an order.

Pull the last 60 days. Sort the search terms by spend and mark every one that has spent more than your product's margin on a single sale without an order. However long the list is, each line on it is money you can stop spending. Then check two rates for each product, the click-through rate (the share of shoppers who click after seeing your ad) and the conversion rate (the share of clicks that become orders). A product shown many times with few clicks has a problem on the search results page, usually price, main image or review count. A product with many clicks and few orders has a problem on its detail page.

Look at timing as well. A brand-new product with no reviews will show a high ACoS, and Amazon Ads says to expect high ACoS from new campaigns and to judge them on other measures at first. Allow time for the campaign to gather data, with a deadline for reviewing its results.

Set a limit before you start. Agree with your team how many weeks and how much spend a launch gets before you judge it on margin, and put both numbers in writing so nobody moves them when the report looks bad.

What fixes a ROAS below 1?

A ROAS below 1 is fixed by cutting the spend that does not convert, moving budget to the searches and products that do, and repairing the listings that lose shoppers after the click. The order matters, because more budget poured into a weak listing only loses money faster.

Work through it in this sequence.

1. Add the search terms that spend without orders as negative keywords, so your ads stop showing for them. The same targeting guide suggests waiting until a term has had at least 20 clicks before you judge it.
2. Move the search terms that do convert into manual campaigns with exact keywords, where you can set a bid for each one.
3. Set bids by product from its break-even ROAS, so a low-margin product never bids like a high-margin one.
4. Add longer, more specific searches that the largest brands in your niche do not chase, where clicks cost less and shoppers know what they want.
5. Fix the listing of any product whose conversion rate trails the top sellers in its niche, from the main image and title to the price and the questions shoppers ask.

Keep a weekly record of each change and its effect on margin, not only on ROAS. If your ROAS rises but total sales fall, you may simply have cut spend that was working. Compare each product's total ROAS with its break-even number every week until the two meet.

When is the problem the product rather than the ads?

The problem is the product rather than the ads when the listing converts well, the targeting is clean, and the margin still cannot carry the cost of a click. No bid strategy can fix a price that leaves too little after Amazon's fees.

You can see it in the numbers. If shoppers buy at a healthy rate once they click, but the clicks in your niche cost more than your margin per sale, the product needs a different price, a different pack size or a different niche. If shoppers click and leave, compare your price, reviews and claims with the top sellers on page one before you blame the campaigns.

Some first launches carry several of these problems at once. When that happens, a full restart after a failed launch may pay better than another round of bid changes. Our Amazon launch services begin with this split between ad problems and product problems. Before your next budget meeting, mark each product as an ad fix, a listing fix or a product to stop.

Frequently asked questions

What is a good ROAS on Amazon?

There is no single good figure. A good ROAS is one above the break-even level for that product, and that level depends on how much of the price is left once cost and fees are paid. A product keeping half its price needs a ROAS of 2, while one keeping a fifth needs 5.

Should I turn off ads when ROAS drops below 1?

Usually not all at once. Switching everything off also stops the sales that help a newer product collect its first reviews. Pause the losing search terms and products first, keep the profitable ones running, and review the effect over two or three weeks.

How long should a new Amazon product run ads at a loss?

Agree a limit in weeks and in dollars before the launch, based on what the product earns at a realistic conversion rate. Once reviews arrive and the listing has a few weeks of data, judge it on margin. If it still sits far below break-even, the product or its price needs a decision.

Is ACoS or ROAS the better measure?

One is the inverse of the other, so pick whichever your team finds easier to read. What matters more is comparing either one with the product's break-even level and looking at total sales alongside ad sales.