Do Merch on Demand ads make money?
They do when the royalty of a sale covers the clicks it took to make it. Merch on Demand (formerly Merch by Amazon) products are advertised like any other product, with Sponsored Products campaigns in Amazon Ads, and the arithmetic is the same: earnings per sale against cost per sale.
What makes Merch different is how thin a royalty is compared with the price, and that changes how low your bids and your ACOS must be.
What is the break-even ACOS of a Merch design?
Your royalty divided by the list price. Amazon's ACOS is computed on the price the shopper pays, not on the royalty you earn, so the break-even point is low.
Example: a $19.99 shirt that pays a $3.00 royalty breaks even at an ACOS of 15%. A Merch ACOS of 20% looks low and still loses money: at $19.99 it is $4.00 of ads per sale against $3.00 of royalty.
Break-even ACOS = royalty ÷ list price × 100
How much can a click cost on Merch ads?
At most your royalty times your conversion rate. At a $3.00 royalty and 8 sales per 100 clicks, a click must cost less than $0.24 to pay for itself.
To keep $1.00 per sale, take that $1.00 off the royalty first: (3.00 − 1.00) × 8% = $0.16 per click at most.
Break-even cost per click = royalty × conversion rate
Where to find your Merch royalty
Merch on Demand shows the royalty of a product when you set its price, for each marketplace. It changes with the product type, the price and the marketplace, so read it for the design you advertise.
Royalty tables published elsewhere disagree with each other. Use the figure in your Merch on Demand dashboard; the $3.00 on this page is an example.
How many clicks before judging a design?
More than it seems. At an 8% conversion rate, a sale takes 12 or 13 clicks on average, and a design that converts normally still goes 30 clicks without a sale about 8% of the time (0.92 to the power of 30).
With a catalog of many designs, bid low enough that each one can gather those clicks without losing much, then stop the designs that keep spending without selling.