Cost of Amazon Ads: What You Need to Know Before You Spend a Dollar
- Gohar alvi
- 2 days ago
- 10 min read
Amazon’s advertising platform has become pay-to-play – running strategic ads is often essential for visibility and sales. However, budgets can climb quickly if you’re not careful. Advertising on Amazon primarily uses a pay-per-click (PPC) model, meaning you bid on keywords and pay each time someone clicks your ad. In 2024 Amazon’s global ad revenue exceeded $56 billion, so competition is fierce. To spend wisely, sellers must understand how Amazon charges for ads, what metrics to watch, and where the average Amazon ad spend lies for businesses like theirs. This guide breaks down costs, pricing models, and common pitfalls so you can make data-driven decisions before investing a single dollar.
Breakdown of Amazon Ad Pricing Models
Amazon offers several ad formats, each with its own pricing model. The two primary models are cost-per-click (CPC) and cost-per-mille (CPM) (cost per 1,000 impressions):
Sponsored Products – Shoppers see individual product ads in search results and product pages. Charges are CPC-based. The average Sponsored Products CPC in 2025 is roughly $0.75–$1.30 per click, though highly competitive items may cost more.
Sponsored Brands – These banner-style ads (with logo and headline) can use CPC or a vCPM (viewable CPM) model. On average, sponsored brands ads run $1.10–$2.50 per click. (They also require creative assets, adding production cost.)
Sponsored Display – These are audience-targeted or product-based display ads. They operate on CPC or CPM. Typical CPC is $0.80–$1.60. CPM can range roughly $4–$12 per thousand impressions, depending on targeting.
Video & Audio Ads – Amazon DSP video/audio ads use CPM. They have high minimum spends (often $10,000+), so they suit large brands.
Other Formats – Amazon Posts and Live are currently free, while custom solutions vary by campaign.
A summary table of ad formats and cost models:
Ad Format | Pricing Model | Typical Cost (USD) |
Sponsored Products | Cost-per-click (CPC) | ~$0.81–$1.30 per click |
Sponsored Brands | CPC (or CPM/vCPM) | ~$1.10–$2.50 per click |
Sponsored Display | CPC (or CPM) | ~$0.80–$1.60 per click ($4–$12 CPM) |
Amazon Video/Audio Ads | Cost-per-mille (CPM) | Typically $10,000+ minimum spend |
Amazon Posts/Live | Free (no ad fee) | N/A |
Table: Amazon ad formats and their pricing models.
What Is the Average Amazon Ad Spend?
Budgeting for Amazon ads varies by seller size and strategy. Small sellers often start modestly, while big brands can spend tens of thousands per month. In general:
Daily Spend: According to AdBadger data, the average Amazon seller spends roughly $263.58 per day on advertising. That’s about $8,000 per month on average. However, daily spends can range widely – from $20 to $300 or more per day depending on company size and goals.
Monthly Budgets by Seller Type: New or small sellers typically begin with $500–$1,000 per month. Mid-sized sellers with established product lines might spend $2,000–$10,000 per month, often using a mix of Sponsored Products, Brands, and Display. Enterprise or large brands can allocate $20,000+ per month to aggressively defend top search placements. For context, a UK report notes small sellers spending about £1–5k per month and large ones £10–100k+, underscoring how spend scales with business size.
Ultimately, there is no one “average” spend that fits every seller. Your Amazon ad spend average will depend on your sales volume, product category, profit margin, and growth ambitions. The key is to spend enough to get meaningful data and sales without shooting blindly. For example, beginners often start with a $30/day test budget, while more data-driven sellers may allocate several thousand dollars based on forecasted ROAS. The important thing is to track performance (see next section) and adjust budgets as you learn.
Key Metrics to Track Your Amazon Advertising Costs
Monitoring the right metrics ensures that your ad dollars are driving value. Key Amazon ad metrics include:
Cost per Click (CPC): The amount you pay per click. Keep an eye on average CPC for your keywords or campaigns. Lowering average CPC stretches your budget further.
Click-Through Rate (CTR): The percentage of impressions that turn into clicks. A higher CTR improves efficiency. If CTR is low, your ads or targeting may need optimization.
Conversion Rate (CVR): The percentage of clicks that become sales. Improving your product listing (better images, copy, reviews) can boost CVR and lower your effective cost per sale.
Advertising Cost of Sales (ACoS): The ratio of ad spend to sales generated, expressed as a percentage. It’s calculated as (Ad Spend ÷ Ad Sales) × 100. A lower ACoS means higher profitability. For example, an ACoS of 20% means you spent $0.20 to make each $1 of revenue.
Return on Ad Spend (ROAS): The inverse of ACoS (Revenue ÷ Spend). If your ACoS is 25%, ROAS is 4×. Target ROAS should align with profit margins.
Daily/Monthly Spend: Track how your spend trends over time vs. budget. Use Amazon’s budget pacing and alerts to avoid overspending.
Tracking these metrics (often through Seller Central reports or tools like Sellermetrics and AdBadger) helps you answer: “Am I getting profitable sales for my advertising dollars?” For instance, if your average ACoS creeps above your profit margin, it’s a signal to refine keywords, pause underperformers, or lower bids.
How to Calculate Your Cost to Advertise on Amazon
To plan and evaluate ad spend, you can use straightforward calculations:
Total Ad Spend: Sum of (Clicks × CPC) for all keywords in a period.
ACoS Calculation: (Ad Spend ÷ Sales from Ads) × 100.
Example: If you spend $1,000 on ads in a week and those ads generated $5,000 in sales, then ACoS = ($1,000/$5,000)×100 = 20%.
Target ACOS: Determine your breakeven ACoS by factoring in margins and costs. For instance, if your profit margin after Amazon fees is 30%, you might target an ACoS below 30% to stay profitable.
Click Volume Estimate: Given a target budget and average CPC, you can estimate clicks. E.g., a $500 budget with $1.00 CPC yields ~500 clicks.
Remember that ACoS and ROAS inform bidding: if your ACOS is higher than desired, raise your target ROAS or trim low-performing keywords. Conversely, if you’re well below target ACOS, you may have room to scale spend. Keeping a close watch on these calculations ensures every dollar of Amazon ad spend drives a positive return.
Factors That Impact the Cost of Amazon Ads
Figure: Major factors that drive up or down Amazon ad costs, such as ad type, competition, and seasonality.
Several variables influence how much you’ll pay for Amazon ads:
Ad Format: Different formats have different bids. Sponsored Products are generally the cheapest per click, while Sponsored Brands and Display often command higher bids. For example, a case study showed Sponsored Products CPC around $0.75, versus about $1.25 for Sponsored Brands.
Product Category & Competition: Popular or high-demand niches drive up CPC. Categories like electronics or health often have bids well above average. By contrast, niche or less-competitive categories (e.g. home & kitchen, crafts) tend to have lower CPCs.
Keyword Competition: Broad, high-volume keywords (e.g. “laptop”, “vitamin C”) attract many bids, raising prices. If many sellers bid on the same term, CPC climbs. High-search keywords may yield high CPCs (sometimes $2–$3+), whereas long-tail, specific keywords can cost a fraction.
Seasonality & Events: During peak shopping times (Prime Day, Black Friday, holidays), bidding intensifies. Amazon reports CPCs for seasonal keywords jumping by 20–30% or more in November–December. If you run ads during major sales events, expect to pay premium CPCs.
Ad Placement: Top-of-search placements cost more than bottom placements. Ads in prime positions (above organic results) have higher expected CTR, so Amazon’s auction will award them to higher bids. Sellers often pay more for “premium” search positions.
Targeting Scope: Broad targeting (or auto campaigns) casts a wide net and can waste spend on irrelevant clicks, driving up cost per conversion. Narrowing by specific keywords, products, or audiences usually lowers wasted spend. For example, an auto campaign without negative keywords may attract low-intent clicks and inflate CPC.
Bid Strategy: Manual vs. automatic bid settings affect costs. Aggressive automatic bidding (like “up and down” strategies) can overshoot bids, while manual bidding lets you cap CPC. Too many manual bid raises without performance data can push costs unnecessarily high.
Relevance & Quality Score: Amazon favors ads with higher expected performance. Relevant, well-structured campaigns with high click-through rates tend to get lower effective CPCs. Poorly targeted or irrelevant ads may cost more per click (since they win fewer auctions).
Product Price & Margins: Sellers often set max CPC as a percentage of product profit. Higher-priced items can support higher CPCs. For example, an expensive electronics item might have advertisers willing to pay $3–$5 per click, whereas a $10 trinket might cap bids at a few cents.
In summary, if your category is competitive, your timing is peak season, or your keywords are broad, expect a higher Amazon ad spend average. Conversely, selling a low-competition niche product off-peak can keep costs relatively low. The diagram above highlights these factors and how they affect CPC and spend.
Tips to Optimize and Lower Your Amazon Advertising Costs
Spending less doesn’t mean cutting budget — it means spending smarter. Here are proven strategies to improve efficiency:
Use Negative Keywords: Block irrelevant searches. For example, if you sell luxury watches, add “cheap” or competitor brand names as negatives. Studies show smart negative keyword use can cut wasted spend by up to 30% in competitive categories.
Improve Your Product Listing: A well-optimized listing (clear title, quality images, key features, good reviews) raises your conversion rate. Higher conversion rates mean each click is more valuable, effectively reducing your cost per sale. Amazon reports A+ content alone can boost purchase likelihood by 5–10%.
Bid Strategically: Don’t blindly bid the default “suggested bid.” Set bids based on realistic ACoS targets and product value. Adjust bids over time — for example, raise bids on high-converting keywords or times of day, and lower bids on underperformers. Tweaking bids by day/week or device can yield quick efficiency gains.
Leverage Long-Tail Keywords: Target specific, longer keyword phrases. Long-tail keywords (e.g., “organic green tea bags 20 count”) usually cost less and attract more qualified shoppers than broad terms (e.g., “tea”). This lowers CPC while maintaining relevancy.
Refine Campaign Structure: Organize campaigns by tight themes (one product or similar products per campaign, grouped by similar keywords). This allows more precise bidding and easier optimization. Avoid bundling unrelated products or mixed keyword intents into one campaign.
Monitor and Iterate: Regularly (at least weekly) review campaign performance. Pause or refine ads/keywords with poor ROI. A study found sellers who checked campaigns weekly improved ad efficiency by ~15%. Use Amazon’s reports (Search Terms, Query Performance) and tools (e.g., Sellermetrics, AdBadger) to identify waste and opportunities.
Start Small and Scale: If you’re new to a keyword or campaign, begin with a modest daily budget ($5–$10) and a conservative bid. Once you see good performance, gradually increase spend. This avoids large early losses while you learn what works.
Following these optimization tips helps lower your cost per acquisition and increase return on ad spend, ensuring every dollar gets you closer to profit.
Common Mistakes That Increase Your Amazon Ad Costs
Even experienced sellers can fall into costly traps. Watch out for these pitfalls:
Poor Campaign Structure: Lumping many products or keywords into one campaign dilutes control. For example, putting unrelated listings (sofas and tables) under one campaign or mixing branded and generic keywords makes it impossible to bid optimally. As SellerMetrics warns, “if you mix things that don’t match, performance will suffer”. Always segment campaigns by product/category theme.
Neglecting Negative Keywords: A huge mistake is not adding negatives. Without them, your ads may show for irrelevant or unprofitable searches (e.g. “cheap [your product]” or competitors’ brands), wasting clicks and raising CPC. Take time to review search term reports and exclude non-converting terms.
Relying Too Much on Broad Match: Broad match keywords capture a wide range of searches, but many will have low purchase intent. This leads to high-spend, low-conversion clicks. As noted, broad match often includes queries that are “of low commercial intent or even contain competitors’ brand names,” hurting ROAS. Use phrase/exact match for core terms, and keep broad match tightly controlled.
Ignoring Product Listing Quality: Driving traffic to a poor listing is wasted money. If your title, images, bullets or price are uncompetitive, paid clicks won’t convert. Continually improve your listing (images, descriptions, reviews). A minor listing upgrade can increase conversion and instantly lower your effective cost per sale.
Bad Bidding Practices: Fixating on “average CPC” without considering margins or goals is risky. Some sellers bid too aggressively on marginal keywords or, conversely, too conservatively on winners. Both increase costs (through wasted spend or lost sales). Adjust bids based on performance data, not gut.
Not Defending Brand Keywords: It may seem wasteful to bid on your own brand, but neglecting it lets competitors poach your customers. If a shopper searches your brand name and only competitors’ ads appear, you effectively lose those sales. Defending your brand terms (often cheap clicks) protects market share.
Focusing on Wrong Metrics: Vanity metrics like impressions or clicks can mislead. The goal is profitable sales, not just ad activity. Sellers fixate on CTR or total spend and overlook profit. Always tie performance to ROI (ACoS or ROAS).
Avoiding these errors keeps your Amazon ad costs in check. As SellerMetrics notes, steering clear of these common mistakes will save time and money in the long run.
Conclusion: Make Every Dollar Count in Your Amazon Advertising
Amazon advertising can unlock significant sales growth, but only if managed smartly. There is no magic budget or secret shortcut success comes from data-driven optimization. Monitor your Amazon ad spend average, adjust bids and keywords based on performance, and focus relentlessly on ROI. Remember to track metrics like ACoS and ROAS (not just clicks or impressions) so you know if ads are truly profitable.
Above all, start with a clear plan: define your goals (e.g., new product launch vs. maximizing profit), set realistic budgets (for example, new sellers might begin with $500–$1,000/month), and review results often. Small sellers and big brands alike see better results when they refine campaigns continually and learn from the data. By following best practices and avoiding common pitfalls, you’ll ensure each advertising dollar works hard for you. In the competitive U.S. market, making every dollar count is the key to sustainable Amazon success.
Frequently Asked Questions (FAQs)
What is the average Amazon ad spend per seller?
It varies widely. One analysis found the average Amazon seller spends about $263.58 per day on ads (around $8,000/month). However, new sellers might start with a few hundred dollars per month, while established brands often spend thousands. Your ideal spend depends on your goals and returns.
What is a good cost-per-click (CPC) on Amazon?
How do I calculate Advertising Cost of Sales (ACoS)?
How can I lower my Amazon advertising costs?
Are Amazon ads worth it for small businesses?