CM2 is the net contribution after ad spend. The number that flows to operating profit.
Formula
CM2 = CM1 − Ad SpendExampleIf CM1% is 40% and TACoS is 25%, CM2% is 15%. On $100K revenue, that is $15K of contribution after ads.
CM2 is the operator's true KPI. Every decision on ad spend, bid strategy, and campaign structure should be measured in CM2 terms, not ACoS terms.
Setting a target CM2% is how you derive your TACoS ceiling. Pick a CM2 target that lets the business breathe (typical: 10-18% for a healthy D2C brand). Subtract it from CM1% to get your max TACoS.
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