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If you’re trying to plan your Amazon advertising budget, you’ve probably found conflicting information ranging from “start with $10/day” to “expect to spend 30% of revenue.”

Let’s cut through the noise with actual numbers.

Quick Answer

Amazon advertising averages $0.97 per click for CPC-based ads, with most sellers spending $50-$3,000 monthly depending on business size and typically budgeting 20-30% of revenue.

The Bottom Line

Here’s what most sellers get wrong: they focus on the cost per click instead of profitability.

In our experience managing over $3.3 billion in cumulative client revenue across 500+ Amazon brands, we’ve seen that successful sellers spend anywhere from $500 to $20,000 monthly on ads – but the amount matters less than your return. 

A $2 click that generates a $50 sale beats a $0.50 click that converts at 2%. The key is starting with clear profit targets, testing systematically, and scaling what works while cutting what doesn’t.

Key Takeaways

• Start small and test: Begin with $50-100 daily budgets for new campaigns, or even $5-10 for initial testing
• Use the 2.5 Rule for planning: Multiply your product price by 0.025 to find your target cost-per-click (example: $30 product = $0.75 target CPC)
• Expect significant category variations: Electronics might cost $1.50+ per click while niche products can be as low as $0.20
• Target 25% ACoS or better: Industry average is 29-30%, but profitable sellers typically maintain 20-25% or lower

Work with specialists who know Amazon: Our former Amazon team members help brands optimize their advertising for measurably better performance

What Are the Different Ways Amazon Charges for Advertising?

Amazon uses three main pricing models, and understanding which applies to your ads helps you budget accurately.

Cost-Per-Click (CPC)

This is how most Amazon ads work – you only pay when someone clicks. The system uses auctions, so you typically pay just one cent more than the second-highest bidder. If you bid $1.00 and the next person bids $0.75, you’ll pay $0.76.

Best for: Sponsored Products, Sponsored Brands, and most Sponsored Display campaigns

Cost-Per-Mille (CPM)

Some display and video ads charge per 1,000 views instead of clicks. You’ll see CPM rates ranging from $4-12 for standard Sponsored Display ads.

Best for: Brand awareness campaigns when you want maximum visibility

Custom Pricing

Premium options like Amazon DSP and Sponsored TV require larger commitments – usually starting at $10,000 for self-service campaigns.

Best for: Established brands with substantial advertising budgets

How Much Does Each Type of Amazon Ad Cost?

Different ad formats have different price points, and knowing these helps you allocate your budget effectively.

Sponsored Products: Your Workhorse Campaign

Average cost per click: $0.81 – $1.30 (across all categories)
What you should budget: 75% of your total ad spend

These are your bread-and-butter ads. They show up in search results and product pages, targeting people actively looking for products like yours. Sponsored Products consistently deliver the lowest cost per click because you’re reaching shoppers with high purchase intent.

When to use them: Always. Every seller should start here.

Sponsored Brands: Showcase Your Portfolio

Average cost per click: $1.10 – $2.50 (across all categories)
What you should budget: 20% of your total ad spend

These ads let you display your logo, a custom headline, and multiple products. Yes, they cost more per click, but they’re building brand recognition while driving sales. Sponsored Brands traffic often converts better because shoppers see your full brand story.

When to use them: Once you have 3-5 strong products and want to build brand awareness

Sponsored Display: Retargeting Done Right

CPC range: $0.80 – $1.60
CPM range: $4 – $12
What you should budget: 5% of your total ad spend

Amazon Sponsored Display ads reach shoppers who viewed your products but didn’t buy, plus they can target specific audiences. They’re your follow-up system, reminding interested shoppers to come back.

When to use them: When you have conversion data and want to recapture lost sales

Premium Options: For Established Brands

Amazon DSP: $8-15 CPM with $10,000-20,000 minimum budgets
Sponsored TV: $20-30 CPM with $5,000-10,000 minimum budgets

These are for brands ready to invest seriously in awareness and reach beyond Amazon’s platform.

When to use them: When you’re doing $1M+ annually and need to expand beyond direct-response advertising

What Should You Actually Budget for Amazon Ads?

Your budget depends on where you are in your Amazon journey.

If You’re Just Starting Out

Recommended monthly budget: $300-1,500 (or $10-50 daily)
Revenue target: Under $500K annually

Start with automatic Sponsored Products campaigns to gather data. Plan for 30-35% of your projected revenue to go toward advertising during your initial launch phase – this is higher than you’ll maintain long-term, but you’re buying data and visibility.

You might be wondering if that’s too much. New products need aggressive advertising to break through. After 3-6 months of gathering performance data, you can typically reduce your percentage to 20-25% while maintaining or growing sales.

If You’re Established but Want to Grow

Recommended monthly budget: $3,000-15,000 (or $100-500 daily)
Revenue target: $500K-$5M annually

At this stage, you should be running 75% Sponsored Products, 20% Sponsored Brands, and 5% Sponsored Display. You’re using manual campaigns with proven keywords, regularly adjusting bids, and managing negative keywords aggressively.

Sellers at this level who implement systematic weekly optimization typically see 20-25% improvement in efficiency within the first quarter.

If You’re Running a Serious Operation

Recommended monthly budget: $15,000-60,000+ (or $500-2,000+ daily)
Revenue target: $5M+ annually

You need the full toolkit: all ad types, custom audiences, DSP campaigns, and probably a dedicated team or agency managing it. At this scale, advertising typically runs 15-25% of revenue, and you’re focused on TACoS (Total Advertising Cost of Sales) rather than just ACoS.

What’s the 2.5 Rule and Should You Use It?

This rule of thumb, used by some Amazon advertisers, is a quick way to estimate what you should pay per click:

Your product price × 0.025 = Your target CPC

So if you’re selling a $40 product:
$40 × 0.025 = $1.00 target cost per click

This assumes you’ll convert 10% of clicks and maintain 25% ACoS. It’s not perfect, but it’s a solid starting point for new campaigns.

When this works well: Products priced $20-100 in competitive categories
When to adjust: If your conversion rate is significantly different from 10%, or if you’re in a very competitive or very niche category

What Actually Affects Your Amazon Advertising Costs?

Let’s talk about the factors that make your costs go up or down – because understanding these helps you control your spending.

Your Product Category Makes a Huge Difference

Electronics sellers routinely pay $1.50+ per click because competition is fierce and margins support it. Meanwhile, if you’re selling a specialized product in a smaller niche, you might pay $0.20-0.40.

Here’s what we’re seeing across different competition levels:

• High competition (Electronics, Supplements): $1.20-$2.50 per click
• Medium competition (Home & Kitchen, Beauty): $0.80-$1.20 per click
• Lower competition (Specialized tools, Niche hobbies): $0.20-0.80 per click

Category-specific ACoS benchmarks for 2025:

• Electronics: ~24%
• Fashion: ~28%
• Toys & Games: ~27%

How You Bid Changes Everything

Amazon offers three bidding strategies, and choosing the right one impacts both your costs and results:

Dynamic Bidding – Up & Down: Amazon can increase your bid up to 100% for placements likely to convert. This aggressive approach works when you have good conversion rates and want maximum sales.

Dynamic Bidding – Down Only: Amazon only lowers your bid when conversion looks unlikely. This conservative approach protects your budget while maintaining visibility.

Fixed Bidding: Your bid stays constant regardless of conversion probability. Best for experienced sellers who want complete control.

What works best: Start with Down Only while you gather data, then switch to Up & Down once you know what converts.

Your Targeting Strategy Controls Cost and Relevance

Long-tail keywords (4+ words like “organic cotton baby blankets”) cost less because fewer sellers compete for them, and shoppers searching these terms typically have higher purchase intent.

Broad targeting reaches more people but includes less relevant traffic, often costing more per sale even if the per-click cost looks attractive.

Product/ASIN targeting ranges from $0.50-$2.00 depending on how aggressively you’re targeting competitor products.

What Metrics Should You Actually Watch?

Forget vanity metrics. Here’s what determines if your advertising is actually working.

ACoS: Your Primary Profitability Metric

Advertising Cost of Sales tells you what percentage of your sales you’re spending on ads.

Industry average: 29-30%
Good performance: Under 25%
Excellent performance: Under 20%

How to calculate it: (Ad Spend ÷ Ad Sales) × 100

Example: You spend $250 on ads and generate $1,000 in sales
($250 ÷ $1,000) × 100 = 25% ACoS

ROAS: Flipping the Perspective

Return on Ad Spend shows how many dollars you earn for every dollar spent.

Average benchmarks by ad type:

• Sponsored Products: $3.67 return per dollar spent
• Sponsored Brands: $3.29 return per dollar spent
• Sponsored Display: $1.60 return per dollar spent

How to calculate your minimum ROAS: Sale Price ÷ Gross Profit (before ad spend)

Example: Your product sells for $50 with $20 in costs
$50 ÷ ($50 – $20) = 1.67 minimum ROAS to break even

Anything above your break-even ROAS is profitable. Aim for at least 3x ROAS on Sponsored Products for healthy margins.

TACoS: The Big Picture View

Total Advertising Cost of Sales compares your ad spend to total sales (not just ad-attributed sales).

Benchmarks:

• Excellent: Under 15%
• Fair: 20-25%
• Too high: Over 35%

TACoS matters because it shows your overall advertising efficiency, including organic sales driven by advertising visibility. A seller with 25% ACoS but 12% TACoS is doing better than someone with 20% ACoS and 22% TACoS.

How Can You Lower Your Amazon Advertising Costs?

Here are the strategies that actually work for improving efficiency.

Master Your Keyword Strategy

Use long-tail keywords aggressively: “stainless steel water bottle” costs more and converts worse than “stainless steel insulated water bottle 32 oz.” The more specific you get, the better your traffic quality and the lower your costs.

Add negative keywords religiously: This is the fastest way to cut wasted spend. Every week, review your search term report and add 10-15 negative keywords for terms that got clicks but no conversions.

Implement Single Keyword Ad Groups (SKAGs): Instead of throwing 20 keywords in one ad group, create separate ad groups for your best performers. This gives you precise control over bids and budgets.

Structure Your Campaigns Strategically

Separate campaigns by match type: Don’t mix broad, phrase, and exact match keywords in the same campaign. Each match type performs differently and needs different bid strategies.

Avoid campaign overlap: When multiple campaigns target the same keywords, you’re bidding against yourself and driving up your own costs.

Schedule ads during peak hours: If your conversion data shows you get more sales from 10am-8pm, why run ads at full budget at 3am? Schedule your campaigns to match shopper behavior.

Optimize Your Product Listings First

Amazon rewards better-converting listings with lower costs per click. If your product converts at 15% instead of 8%, Amazon’s algorithm will show your ads more often at lower costs.

Focus on:

• Professional product photography that shows your product in use
• Product descriptions that address customer questions and concerns
• Getting more positive reviews through great products and customer service
• Pricing competitively within your category

When listings are optimized before scaling ad spend, we consistently see 30-40% improvement in advertising efficiency.

When Should You Increase or Decrease Your Ad Budget?

Knowing when to scale up or pull back separates profitable sellers from those who burn cash.

Increase Your Budget When:

You’re seeing consistent profitability: If your campaigns maintain 20-25% ACoS for 2-3 weeks, add 15-20% more budget to proven campaigns.

Peak seasons are approaching: Black Friday/Cyber Monday and Prime Day justify increased budgets, even if costs rise 20-30%, because overall volume makes it worthwhile.

You launch new products: New listings need advertising visibility to generate initial reviews and sales velocity. Budget 30-35% of projected revenue for the first 60-90 days, then optimize down to 20-25% as organic rankings improve.

Competition is taking market share: If you notice competitors’ ads appearing more frequently than yours, you may need to increase bids or budget to maintain visibility.

Decrease Your Budget When:

ACoS consistently exceeds 35-40%: If you can’t get campaigns profitable after 30 days of optimization, pause them and reassess your product positioning or pricing.

Inventory runs low: Nothing wastes money faster than running ads when you’re about to stock out. Reduce budgets when you hit 30 days of remaining inventory.

Off-peak periods offer better opportunities: If you’re in a seasonal category, use slower months to test new strategies at lower budgets rather than maintaining peak-season spending.

How Do Costs Change Throughout the Year?

Your costs aren’t static – they fluctuate with shopping patterns and competition.

Peak Seasons (Expect 20-30% Higher Costs)

Black Friday/Cyber Monday: Everyone’s competing for attention, driving up costs. But conversion rates often improve enough to justify the increased spend.

Prime Day: Similar to Black Friday – costs spike, but traffic and conversion opportunities increase.

Holiday Shopping Season (October-December): Sustained high competition throughout the quarter. Plan for this in your annual budget.

Lower Cost Periods

January-February: Post-holiday shopping slows, and many sellers reduce budgets. Great time to gain market share at lower costs.

Mid-summer (June-July): Generally slower for most categories (except seasonal products). Test new strategies during these periods.

Late August: Right before back-to-school rush but after summer vacation spending. Often a sweet spot for efficient advertising.

Smart approach: Maintain year-round presence but adjust budgets by 20-30% between peak and off-peak periods rather than turning campaigns on and off completely.

Should You Hire an Agency or Manage Ads Yourself?

This depends on your time, expertise, and business goals – and honestly, there’s value in professional management at almost any stage.

When You Might Start on Your Own

You’re in the early testing phase: If you’re validating a new product or just learning the Amazon ecosystem, running your own campaigns for 2-3 months helps you understand the fundamentals and your unit economics.

You have significant time to dedicate: Active advertising management requires 5-10 hours weekly minimum. If you genuinely have this time available and want to build this skillset, you can handle basic campaigns yourself initially.

You’re working with very limited budgets: If you’re spending under $500 monthly on ads while you build initial traction, the learning experience might outweigh agency costs in your specific situation.

When Professional Management Makes Sense

Here’s the reality: most sellers benefit from professional management sooner than they think.

You’re spending $1,000+ monthly on ads: At this level, even a 15-20% efficiency improvement (which is conservative) typically covers agency fees while putting more profit in your pocket.

Your time is better spent elsewhere: Every hour you spend learning Amazon’s auction mechanics is an hour you’re not spending on product development, supplier relationships, or business strategy. For most business owners, the opportunity cost of DIY management exceeds agency fees.

You want to scale without the expensive learning curve: Experienced agencies help you avoid the costly mistakes that most sellers make – like bidding wars with yourself, poor campaign structure, or missing negative keywords that drain thousands in wasted spend.

You’re doing under $500K but ready to grow: You don’t need to be a large seller to benefit from professional management. Many smaller brands see the fastest efficiency gains because there’s often significant low-hanging fruit in their advertising.

What Professional Management Typically Costs

Management fees: 10-20% of ad spend, or $1,000-5,000+ monthly retainers depending on complexity and scale
Setup fees: $500-2,000 for initial campaign development and account auditing
Performance-based options: Some agencies structure fees tied to results

The question isn’t whether you can run ads yourself – many sellers can learn the basics. The question is whether your time and the inevitable learning curve cost more than working with specialists who’ve already managed hundreds of accounts and know what works.

What Should You Do First?

If you’re just starting or looking to improve your Amazon advertising, here’s your action plan:

Week 1: Set Clear Profit Targets

• Calculate your break-even ACoS and ROAS
• Determine how much you can afford to spend per click using the 2.5 Rule
• Set initial daily budgets of $50-100 (or $10-20 if testing)

Week 2-4: Launch and Monitor

• Start with Sponsored Products automatic campaigns to gather data
• Let campaigns run for at least 2 weeks before making major changes
• Track ACoS, ROAS, and conversion rate daily

Week 5-8: Optimize Based on Data

• Add negative keywords weekly from your search term reports
• Increase bids 15-25% on keywords converting above 10%
• Pause campaigns with ACoS above 40% that aren’t improving

Week 9-12: Scale What Works

• Move best-performing keywords to manual campaigns for tighter control
• Add Sponsored Brands campaigns once you identify strong products
• Consider Sponsored Display for retargeting

The key is starting with realistic expectations, gathering performance data systematically, and scaling successful campaigns while cutting underperforming spend. Whether you start with $50 daily or $5,000, the same principles apply: test, measure, optimize, and scale what works.

Work With Amazon Advertising Specialists Who’ve Been on the Inside

At Canopy Management, our team includes former Amazon employees who understand the platform from both sides. We’ve managed over $3.3 billion in cumulative client revenue for brands ranging from emerging sellers to established enterprises generating $50M+ annually.

What makes us different: We don’t just run your ads – we build systematic optimization processes that consistently improve performance over time. Our clients work with strategists who’ve actually worked at Amazon and understand how the algorithms, auction mechanics, and internal systems really work.

We specialize in:

• Full-funnel Amazon advertising strategy (Sponsored Products, Brands, Display, and DSP)
• Systematic campaign optimization that reduces wasted spend
• Scaling proven campaigns while maintaining profitability
• Custom reporting that shows what actually matters to your business

Whether you’re spending $3,000 or $300,000 monthly on Amazon ads, we can show you specific opportunities to improve your efficiency. 

Schedule a free advertising audit and we’ll analyze your current performance, identify waste, and show you exactly where you’re leaving money on the table.

Canopy Management is a full-service marketing agency for Amazon, Walmart, and TikTok sellers. Our team consists of multi-million dollar, omni-channel entrepreneurs, industry leaders, and award-winning experts.