If your Etsy shop sales aren't growing, you might be missing out on a key tool: Etsy ads. Let's explore how to set them up quickly and potentially double your sales.

Prefer watching a video? Check out our detailed guide here.

Why Etsy Ads Matter – A Real-Life Example

At ProfitTree, the impact of Etsy ads is underscored by the experience of our co-founder, Hannah. Without advertising in 2023, Hannah would have missed out on over $150,000 in revenue.

In 2023 her shop did over $300,000 in revenue with a $107,240 profit. 

Here’s a breakdown of the numbers: an investment of about $40,737.23 in Etsy ads generated roughly $137,362.06 in Etsy sales. Additionally, $2,186.90 spent on offsite ads brought in another $18,089.24 totaling over $150,000 in revenue driven solely by advertising efforts.

This strategic investment not only covered costs but also yielded an extra $34,000 in profit she otherwise would have not made. These figures demonstrate the critical importance of utilizing Etsy ads effectively to avoid significant financial losses. 

ProfitTree’s tools are tailored to help maximize revenue and profits from Etsy shops, ensuring that no potential earnings slip through the cracks.

Need a visual? Watch this.

The Number You’re Missing To Achieve This: Total Advertising Cost of Sale (TACoS)

Etsy ads can feel confusing. You might look at cost per click (CPC), ROAS (return on ad spend), or impressions, and feel completely lost on whether your ads are actually working. That’s because Etsy doesn’t show the single most important metric for optimizing ads: TACoS or Total Advertising Cost of Sale.

If you're familiar with other platforms like Amazon, TACoS isn’t new. It measures your total ad spend relative to your total sales and not just your advertised sales. This includes organic sales and revenue from other listings that might’ve been influenced indirectly. And here's the thing: it’s not just about ROAS. While your ROAS might look bad, TACoS can show you the overall health of your ads - including those side-effects like boosted organic purchases.

Example: Why TACoS Matters More Than ROAS?

Let’s say you run an ad, and at first glance, the ROAS is disappointing. But with TACoS, you realize the ad also helped your product rank higher in search, boosting organic sales. All those new reviews, maybe even a great photo review, can flood additional sales in the future. So even a bad-looking ROAS can lead to a net positive outcome when TACoS is considered.

Etsy doesn’t provide TACoS data natively, but we’ve built a new feature that does.

Our New Feature That Changes the Game

With our new dashboard launching soon, you’ll have access to all the data Etsy doesn’t give you. We’ve added TACoS as a primary metric so that you can easily assess whether your ads are profitable. Plus, you can drill down into each listing to see which ones are worth continuing to advertise based on TACoS alone.

When your TACoS gets too high i.e., your ads are eating up too much of your total revenue, you can turn off those particular ad campaigns for individual listings and focus only on the ones that remain profitable.

Using TACoS to Optimize Ads

To really simplify this: your new goal is to keep your TACoS low (you decide your target TACoS based on the profit you want to make). Once you have that percentage dialed in, you just turn off any ads for listings that don’t meet your TACoS target. Boom. You’re in control and your profits start to grow.

Here’s how to set a good TACoS:

Imagine you have a lemonade stand and you're spending money to tell people about it, like printing flyers. You want to make sure you're not spending too much on flyers compared to how much lemonade you're selling.

1. Decide how much you want to spend on ads: Let's say for every $100 you make selling lemonade, you want to spend $10 or less on flyers. That’s a 10% TACoS.

2. Check your TACoS in ProfitTree: check your TACoS % in ProfitTree for a good data sample of time before making the decision to keep the ad on or turn off 

3. Watch your profit: Make sure you’re still making enough money after paying for lemons, cups, and sugar. If you're not making enough, lower your target TACoS (spend less on ads) and become more strict about what ads you leave on to spend your budget.

4. Adjust as you go: If your ads bring in a lot of lemonade buyers, you might be okay spending a bit more. But if not, you need to spend less on flyers to save money.

So, setting your TACoS is like making a rule for yourself to make sure your advertising (flyers) helps you grow without wasting your lemonade money. Keep it small enough to stay profitable but big enough to bring in new customers! 🍋

Our tool has been working with hundreds of sellers to dial in this feature. Our research has shown TACoS is the method used by the biggest Amazon sellers - those 7 and 8-figure accounts you hear about crushing it. This is the exact way they analyze their listings, and now you can do the same with your Etsy shop.

What’s Next?

This is just the first version of our new ad dashboard with even more powerful insights that are gonna be rolling out over time. We're talking about everything from new features to additional analytics designed to help you take full control of your ad spend and maximize those profits.

We’ve seen this strategy work across hundreds of sellers. It’s clear that once you start optimizing based on TACoS, the whole ad game starts making sense. No more gambling with your budget, no more guesswork about whether your ads are doing anything for you.

Conclusion

Running successful Etsy ads is all about understanding the real cost and value they bring. When you shift to looking at TACoS instead of just traditional metrics like ROAS, the mystery starts disappearing. Ads no longer seem like a gamble; they become another tool to supercharge your sales.

Check out this video for more insights: Watch Now

With our platform doing the heavy lifting, the process of analyzing and optimizing your Etsy ads is easier than ever.

Take advantage of this. Spend smarter, not harder, and watch your Etsy shop grow.