Amazon PPC Advertising Guide

Amazon advertising is essential for new product launches and competitive categories. Without advertising, your new listing sits on page 10 of search results, invisible to customers. With advertising, you drive immediate visibility while building sales velocity that improves organic ranking. Amazon’s advertising platform now handles £68 billion in annual ad revenue (2025), making it one of the largest advertising networks globally. This guide covers everything you need to launch profitable PPC campaigns on Amazon, including campaign structure, bidding strategy, optimization, and the metrics that matter most to your bottom line.

Why Amazon Advertising Matters

Amazon advertising serves two purposes: immediate sales and long-term organic ranking. In the short term, ads drive sales directly. In the long term, sales velocity from advertising signals to Amazon’s A9/A10 algorithm that your product is popular, improving your organic ranking. The algorithm then rewards you with higher placement on relevant search terms, reducing your advertising dependence over time.

Without advertising, most new products languish on page 10+. With steady, profitable advertising, you can reach page one in 4-8 weeks. Once your organic ranking improves, your ACoS (Advertising Cost of Sale. The metric that matters most) naturally decreases because more of your sales come from organic search (free traffic) rather than paid ads.

Think of Amazon advertising as an investment in organic ranking, not just an expense. Budget accordingly.

Amazon Ad Types: Which to Use When

Sponsored Products (The Bread and Butter)

Sponsored Products are the most common Amazon ad type. Your product listing appears in search results and on competitor product pages with a “Sponsored” label. You pay per click (PPC model), not per impression.

When to Use: Always. Start every campaign with Sponsored Products. They’re straightforward, scalable, and easy to optimize.

Placement Options:

• Top of search results (positions 1-4)
• Side of search results (right sidebar on desktop)
• Product page ads (appear on competitor product detail pages)

Best For: New product launches, driving immediate sales, increasing sales velocity for organic ranking improvement.

Sponsored Brands (Premium Branding)

Sponsored Brands are banner-style ads that appear at the top of search results with your logo, headline, and multiple product listings. You need an active trademark and Brand Registry enrollment to run Sponsored Brands.

When to Use: After you’ve optimized Sponsored Products and have consistent sales. Sponsored Brands are more expensive than Sponsored Products but build stronger brand awareness.

Benefits:

• Higher click-through rates than Sponsored Products (often 2-3x higher)
• Builds brand awareness. Customers see your logo and brand name
• Direct traffic to a custom landing page (your brand storefront or multiple products)
• Command premium positioning on search results

Best For: Multi-product brands, building brand equity, capturing market share in competitive categories.

Sponsored Display (Retargeting)

Sponsored Display ads are display banner ads that appear on product detail pages and other locations across Amazon’s network. You target by product, interest, or audience.

When to Use: As a secondary campaign after you’ve optimized Sponsored Products. Retargeting customers who visited but didn’t buy is highly effective.

Best For: Retargeting cart abandoners, reaching in-market audiences, building awareness on competitor product pages.

Understanding ACoS: The Metric That Determines Profitability

ACoS (Advertising Cost of Sale) is the most important metric in Amazon advertising. It measures the percentage of your sale price spent on advertising.

Formula: ACoS = (Advertising Spend / Attribution Sales) × 100

Example: You spend £1,000 on ads and generate £3,400 in attributed sales. Your ACoS is (£1,000 / £3,400) × 100 = 29.4%.

What Is a Good ACoS?

The industry average ACoS across all Amazon sellers is 30%. However, “good” is relative to your profit margins.

Margin-Based ACoS Targets:

• 40%+ margin: Can sustain 35-40% ACoS and remain profitable
• 30% margin: Should target 20-25% ACoS for healthy profit
• 20% margin: Should target 10-15% ACoS (tight, but possible with strong organic ranking)
• Below 20% margin: Likely unprofitable on Amazon; reconsider the product

Calculate your break-even ACoS using this formula:

Break-Even ACoS = Your Profit Margin / (1 – All Other Costs as % of Sale Price)

If your product has a 30% gross margin and all other costs (referral fees, fulfillment, overhead) total 10% of sale price, your break-even ACoS is 30% / (1 – 0.10) = 33%. An ACoS above 33% means you’re losing money.

TACoS: The Long-Term Profitability Metric

TACoS (Total Advertising Cost of Sale) measures advertising spend as a percentage of total revenue (both attributed and organic sales). It’s a better long-term metric than ACoS because it includes organic sales driven by your advertising investment.

Formula: TACoS = (Advertising Spend / Total Revenue) × 100

Example: You spend £1,000 on ads, generate £3,400 in attributed sales (direct from ads), and £2,000 in organic sales (from improved ranking). Total revenue is £5,400. TACoS is (£1,000 / £5,400) × 100 = 18.5%.

As a healthy target, aim for TACoS below 20%. This means your advertising spend is less than 20% of your total revenue, leaving healthy margins for operations and profit.

Campaign Structure: Automatic vs Manual

Automatic Campaigns (Start Here)

Automatic campaigns are Amazon’s automated matching system. You create a campaign, set a daily budget and bid, and Amazon matches your product to relevant search terms automatically. You don’t specify keywords. Amazon’s algorithm decides when to show your ads.

Advantages:

• Zero keyword research required. Amazon handles matching
• Discovers keywords and search terms you haven’t thought of
• Quick to set up and launch
• Useful for ongoing visibility on long-tail variations

Disadvantages:

• Limited control over which searches trigger your ads
• Often wastes budget on irrelevant searches
• Typically has higher ACoS than well-optimized manual campaigns

When to Use: Always start with automatic campaigns. Run them for 50-100 sales to gather keyword data, then transition to manual campaigns using the keywords that actually drove conversions.

Manual Campaigns (Optimize Here)

Manual campaigns let you specify which keywords trigger your ads. You choose keywords, match types (broad, phrase, exact), and bids. This gives you precise control.

Advantages:

• Complete control over which searches trigger your ads
• Bid strategically on high-converting keywords
• Use negative keywords to prevent wasted spend
• Typically lower ACoS than automatic campaigns

Disadvantages:

• Requires keyword research and competitive analysis
• Ongoing optimization needed (monthly bid adjustments, negative keyword updates)
• Takes time to set up properly

When to Use: After automatic campaigns have generated keyword data. Extract the search terms that converted, organize them by relevance, and bid strategically on high-value keywords.

Keyword Research for Amazon PPC

Data Sources

Search Term Report (from Automatic Campaigns): This is your primary data source. After 2-4 weeks of automatic campaigns, review the search terms report. It shows every search term that triggered your ads, how many clicks each received, and how many converted to sales. This real data about your actual customers is invaluable.

Brand Analytics (if you have Brand Registry): Brand Analytics provides search term reports showing which search terms customers use to find products in your category. Even if they didn’t click your ads, this shows demand for certain keywords. See our guide on Amazon Brand Registry for more information.

Competitor Analysis: Search for your product on Amazon. Who are your top competitors? Visit their listings and note the keywords they emphasize in their titles, bullet points, and descriptions. These are likely high-converting keywords for your product category.

Amazon Autocomplete: Start typing a search term in Amazon’s search bar. Amazon’s autocomplete suggestions show popular search terms. If you type “wireless ear,” you’ll see “wireless earbuds,” “wireless earbud case,” “wireless earbuds with mic,” etc. These are real search terms with volume.

Keyword Organization

Organize keywords into themes:

High Intent (Highest Priority): Search terms that clearly indicate purchase intent and are specific to your product. Example: “true wireless earbuds under £50,” “noise cancelling earbuds,” “sports earbuds waterproof.” These convert at high rates; bid aggressively.

Category Keywords (Medium Priority): Broader keywords indicating interest in your category but not specific to your product. Example: “wireless earbuds,” “earbuds,” “Bluetooth earbuds.” These get high volume but lower conversion; bid moderately.

Long-Tail Keywords (Lower Priority): Very specific, low-volume searches. Example: “tiny wireless earbuds with noise cancellation and 30-hour battery.” These convert at high rates if they match your product exactly, but low volume means limited traffic. Bid moderately.

Allocate more budget and higher bids to high-intent keywords. Run category keywords to maintain volume. Use long-tail keywords to catch specific customer needs.

Bidding Strategy: How to Set Your Bids

Starting Bid Amount

Start your initial bids at (Profit Per Sale / 3). If your product generates £5 profit per sale, start with £1.67 per click.

This conservative starting point ensures you don’t overspend while gathering performance data. Adjust bids up or down based on actual conversion data after 50-100 clicks.

Dynamic Bids vs Fixed Bids

Dynamic Bids (Recommended for Most): Amazon automatically adjusts your bid up or down based on likelihood of conversion. If Amazon’s algorithm thinks a click is likely to convert, it reduces your bid (since conversion is more probable). If it thinks conversion is unlikely, it increases your bid (to compensate for lower probability). This balances volume and conversion automatically.

Fixed Bids: You set a static bid and it never changes. You maintain complete control but require manual ongoing adjustments.

Start with dynamic bids and switch to fixed bids only if you’re sophisticated with Amazon advertising and prefer manual control.

Bid Adjustments by Placement

Amazon offers placement-level bid adjustment. Top-of-search placement (positions 1-4) gets more visibility but requires higher bids. You can set different bids for top placement vs side/bottom placement, which helps optimize your budget.

If your data shows that top-of-search converts better than side placement, increase bids for top placement and decrease for side placement.

Campaign Optimization: The Weekly Workflow

Week 1-4: Launch and Gather Data

Set your automatic campaign with a conservative bid, a daily budget of £10-20, and let it run. Don’t optimize yet. You’re gathering data on which search terms trigger your ads and which convert.

Daily Action: Review your Seller Central dashboard to ensure campaigns are live and getting impressions.

Week 5+: Review and Optimize

Once you have 50+ clicks and measurable data, optimize:

Step 1: Review Search Term Report

• Identify keywords with high ACoS (no conversions or expensive clicks). These are candidates for negative keywords.
• Identify keywords with low ACoS (high-quality conversions). These are candidates for manual campaigns with higher bids.
• Look for search terms you didn’t think of. These represent customer intent you should capitalize on.

Step 2: Add Negative Keywords

Add high-ACoS search terms as negative keywords to prevent wasted spend. If you’re selling premium noise-cancelling earbuds and people search for “cheap earbuds,” add “cheap” as a negative keyword so your ads don’t trigger for budget-conscious searchers.

Step 3: Launch Manual Campaigns

Extract high-converting search terms from your automatic campaign search term report. Launch manual campaigns targeting these keywords with precise match types and strategic bids. High-converting keywords warrant higher bids; lower-converting keywords warrant lower bids.

Step 4: Increase Budget on Winners

If your automatic campaign is profitable (ACoS below your target), increase the daily budget by 10-20%. More budget = more impressions = more sales volume.

Monthly Action: Repeat this process. Allocate 1-2 hours per month to review campaigns, adjust bids, add negative keywords, and launch new manual campaigns based on emerging search terms.

New Product Launch Strategy

Launching a new product requires aggressive advertising to build initial sales velocity. Here’s the optimal sequence:

Week 1: Automatic Campaign

Launch a single automatic campaign with a moderate daily budget (£15-20) and bid. Let Amazon’s algorithm match your product to relevant searches and gather keyword data.

Week 2-4: Scale Automatic Campaign

If your automatic campaign is profitable (ACoS below your target), increase daily budget to £30-50. Continue gathering search term data.

Week 5+: Launch Manual Campaigns

Extract high-converting search terms from your automatic campaign and launch manual campaigns. Allocate 60% of budget to manual campaigns targeting your best keywords, 40% to ongoing automatic campaigns to discover new keywords.

Week 8+: Optimize and Scale

By week 8, you should have significant sales data. Optimize aggressive campaigns (high ACoS, low-converting keywords), scale profitable campaigns, and continue refining your keyword strategy.

Common Amazon Advertising Mistakes

Bidding Too High on Broad Keywords

Bidding aggressively on broad category keywords (“earbuds,” “headphones”) is wasteful. Hundreds of different products match these terms. Your bid will be pushed high by competition, your clicks expensive, and conversion low because search intent is unclear. Reserve high bids for specific, high-intent keywords that match your product exactly.

Ignoring Negative Keywords

Wasted ad spend on irrelevant searches compounds over time. If your ads are triggering for “cheap earbuds” or “wireless headphones for kids” but you sell premium adult earbuds, every click on these irrelevant searches is wasted money. Review search term reports weekly and aggressively add negative keywords.

Not Using Brand Registry for Sponsored Brands

Sponsored Brands ads command premium positioning and higher conversion rates than Sponsored Products. If you have a trademark (even pending), file for Brand Registry immediately. The features unlocked (Sponsored Brands, A+ Content, brand analytics) justify the trademark investment.

Setting and Forgetting Campaigns

Launching campaigns without ongoing optimization is like starting a fire and never adding fuel. Campaigns without active management deteriorate over time. ACoS creeps up, profitability disappears, and you don’t notice until you’ve wasted significant budget. Allocate 30 minutes weekly to campaign review and optimization.

Not Calculating Break-Even ACoS

Many sellers don’t know their actual margins and therefore don’t know if their advertising is profitable. You can’t optimize what you don’t measure. Calculate your break-even ACoS based on your actual costs (COGS, fulfillment, fees, etc.) and never run campaigns above that threshold.

Frequently Asked Questions

What is a good ACoS on Amazon?

Average ACoS (Advertising Cost of Sale) across all Amazon sellers is 29%. A good ACoS depends on your product margins. If your product has 40% margin, you can sustain a 29% ACoS and remain profitable. If your margin is 20%, a 29% ACoS leaves minimal profit. Calculate your break-even ACoS based on your specific margins, then aim for 5-10% below that. TACoS (Total Advertising Cost of Sale, including organic sales) should typically not exceed 20% of total revenue for healthy business growth.

Should I start with automatic or manual campaigns?

Start with automatic campaigns to gather keyword data. Amazon’s algorithm matches your product to relevant search terms and generates impressions, clicks, and sales. After 50-100 sales on automatic campaigns, use the search term report to identify high-performing keywords. Move those keywords to manual campaigns for more precise bid control. Automatic campaigns continue running to catch keywords you haven’t discovered yet.

What’s the difference between broad, phrase, and exact match keywords?

Broad match keywords trigger your ads for searches that include your keyword in any order plus similar variations. Phrase match triggers for searches that include your keyword phrase in that exact order, plus additional words before or after. Exact match triggers only for searches that match your keyword precisely. Broad match gets most impressions but lowest conversion; exact match gets fewest impressions but highest conversion. Use all three, with bid adjustments to favor high-performing match types.

How much should I budget for Amazon advertising?

Budget at least 10-15% of your target revenue for advertising. If you want to generate £10,000 in monthly revenue, plan to spend £1,000-£1,500 on advertising. However, your actual spend depends on your ACoS and business goals. Use the formula: Monthly Ad Budget = Target Monthly Sales × Target ACoS. For a new product launch, expect higher initial spend and ACoS; as sales velocity increases and organic ranking improves, ACoS naturally decreases.

Why should I use negative keywords?

Negative keywords prevent your ads from displaying for irrelevant search terms that don’t lead to sales. If you sell premium wireless earbuds and your ads trigger for “cheap earbuds” or “wired earbuds,” you’re wasting ad spend on custome

2026 Algorithm and Ad Changes

Amazon’s COSMO AI layer now evaluates buyer intent, not just keyword matching. This means your ad’s relevancy is judged not just on keyword presence but on whether your product genuinely solves the problem behind a search query. External traffic from Google, social media, or influencer recommendations that results in Amazon purchases now boosts organic rankings across relevant keywords. For advertisers, this means PPC and organic strategies are more interlinked than ever.