Proudly Canadian — Your Amazon Business Partner for Global Markets
There was a time when simply listing a product on Amazon was enough to start generating sales. The marketplace was less crowded, and competition for visibility wasn’t nearly as fierce. But those days are over.
Today, Amazon is a pay-to-play platform.
Advertising is now a core part of selling on Amazon, and if you’re not investing in ads, you’re leaving serious revenue on the table. In many cases, without ads you may not get any traction at all: your products simply will not be seen enough on Amazon for the financials to work out in your favour.
By the same token, throwing money at ads is NOT the path to success on Amazon: you need a solid strategy that supports your business goals and aligns with your budget, whether you’re launching a new product or trying to scale your brand.
But, before we get into strategy, let’s take a look at why Amazon advertising has become so critical.
Why Advertise on Amazon?
Advertising is a must on Amazon due to a combination of customer behaviour and Amazon’s ad serving practices.
Ads dominate search results on Amazon
The reality is customers see ads on Amazon before anything else!
A whopping 80% of all sales on Amazon happen right on Amazon’s page 1: when a customer searches on the platform, they are immediately presented with ads.
Right away, they see the “top of search” headline ad.
Then they see up to 4 product ads that are all sponsored BEFORE the first organic product slot on the page!
That means that even if you are the best seller in your category, there are product ads ahead of you in the line for customers to scroll through … and we know that customers don’t scroll very far, if at all.
With sponsored products and sponsored brands now dominating search results, if you’re not running ads, you’re not showing up where customers are looking.
Key takeaway? Amazon is forcing sellers to advertise or become relegated to the bottom of the page.
Ads boost sales and generate data
It goes without saying that you run ads on Amazon to increase visibility and sales. A further benefit from your ad investment is that Amazon’s algorithm prioritizes sales velocity and relevance, both of which are heavily influenced by ads, especially when you’re starting out.
Ad campaigns also give you valuable data about what keywords convert, which products resonate, and where your audience is shopping. This data can fuel your overall Amazon strategy, from listings to inventory planning.
Types of Amazon ads
Amazon offers various advertising tools that help sellers and brands promote their products on the platform. These ads appear in search results, on product pages, and across Amazon-owned properties.
The four most commonly used ad types are:
- Sponsored Products – Promote individual listings in shopping results and product pages.
- Sponsored Brands – Feature your brand logo, headline, and multiple products.
- Sponsored Display – Retarget and re-engage shoppers both on and off Amazon.
- Sponsored TV – Allows brands to place non-skippable video ads within ad-supported streaming content.
Each format serves a different purpose depending on your goals, whether it’s launching a product, increasing brand awareness, or boosting conversion rates.
All Amazon sellers get the Sponsored Product Ad placement, which will make up ~70% of your impression share as they are shown across the most placements on the platform.
The number of search ad placements available declines in this order: Sponsored Product, Sponsored Brand, Sponsored Display, Sponsored TV, so plan your budget accordingly.
Note: We do not recommend Sponsored TV currently – focus on the fundamentals until you are spending $50k/month on Amazon search ad spend.
Amazon Advertising Strategies
The right Amazon advertising strategy for your brand will depend on several factors, including your stage of business growth: Are you a new or established brand? How long have you been on Amazon? Where else are you selling (e.g., your own website, retail)? What is your budget?
If you’re a new Amazon seller: take these steps before investing in ads
It’s easy to spend a lot of money on clicks via Amazon advertising, but without the social proof that Amazon reviews provides, your conversion rate will be low, driving your costs up.
If you are new to selling on Amazon, we recommend that you obtain at least 15 excellent reviews for your product before investing in non-branded pay-per-click (PPC) advertising (i.e. advertising that targets keywords other than your own brand name). See more about branded ads below.
We typically recommend you invest your launch budget in getting reviews through programs like Amazon Vine or other review services that comply with Amazon’s Terms of Service.
You can also tap your social followers to go to Amazon and purchase your product when you launch on Amazon. They are more likely to leave a positive review to support you as they already know your product, your brand and the experience to expect.
The best way to leverage your social followers and existing customers is to make them aware of your Amazon product launch and offer a launch discount code of less than 40%. This will ensure you receive verified reviews on the platform. If you offer over 50% as a discount, it will not be a verified review and won’t have as much impact on the algorithm.
(Note: DO NOT try to game the system with fake reviews or you will be eventually shut down.)
We also recommend you do a test buy of your product before you invest in any review programs like Vine to troubleshoot for any potential problems in advance with Amazon’s shipping service. This will prevent potential dissatisfaction with packaging or shipping issues that could negatively impact customer reviews.
Branded ads
If you are an omnichannel brand with few or no reviews and a limited budget, we recommend you invest only in branded ads to begin with while still investing in the social proof reviews.
With a limited budget, you can’t afford to spend thousands of dollars a month to build impressions and consideration. You need to start by maximizing your reach for your own brand, where people know you from other channels.
That means running ads for brand/product name keywords so customers who are already familiar with and loyal to your brand will be able to find and buy from you when they search for you on Amazon.
This will also help prime the Amazon system for expanded, more investment-intensive ad strategies as you grow.
As you gain steam (and social proof!) on Amazon
If you have enough social proof to convince customers your product is good, you can begin to turn on what we call “mid-funnel” ads.
These are ads that target new customers who are less familiar with your brand.
At this stage you’ll expand the keywords you are using in your ad strategy: we recommend keeping your bids on highly relevant, important keywords to drive conversion and deliver a really good return on ad spend. Reach a wider audience with specific focus on longer keyword phrases and branded terms that customers may search.
You can use product research tools (i.e., Helium 10) to look up the CPC for category keywords to better understand the budget you will need as you widen your advertising strategy on the platform.
Want us to do it for you? Book a call to discuss.
How to Measure the Results of your Amazon ad Campaigns
Knowing how to interpret your advertising results is what turns ad spend into smart business decisions.
Here are the key metrics every seller should track to evaluate the performance and profitability of their Amazon advertising campaigns:
ACOS (Advertising Cost of Sales)
Formula: Ad Spend / Attributed Sales
ACOS tells you how efficiently your ads are converting sales. A lower ACOS means better return on your ad spend. The ideal ACOS varies by category and margin. You need to know your breakeven point.
✅ Pro Tip: If your ACOS is higher than your profit margin, you may be losing money on those ads. (You will need to consider the lifecycle of your customer in the grand scheme of the business here as well. If you have a product that is a consumable, your customer may come back to purchase again so you need to consider that in your calculation for profitability.)
TACOS (Total Advertising Cost of Sales)
Formula: Ad Spend / Total Sales (Organic + Paid)
TACOS gives a broader view of how advertising affects your overall business. A declining TACOS suggests your ads are driving organic growth. This is your ideal scenario.
📈 Use TACOS to evaluate long-term brand impact, not just immediate returns.
Return on Advertising Spend (ROAS)
ROAS measures the revenue generated for every dollar spent on advertising. A higher ROAS indicates more effective ad spend.
Formula: Attributed Sales / Ad Spend
For example, if you spent $100 on ads and generated $500 in attributed sales, your ROAS would be:
ROAS = 500 / 100 = 5.0
That means you earned $5 for every $1 spent on ads.
✅ Pro Tip: Regularly analyze and optimize your campaigns to improve this metric, focusing on high-performing keywords and ad placements.
Impressions
Impressions are the number of times your ad is shown.
✅ Pro Tip: If you’re getting high impressions with low clicks, it may be time to test new images or ad copy.
Click-through rate (CTR)
Formula: Clicks / Impressions
✅ Pro Tip: A higher CTR indicates your ad is relevant and compelling. Low CTRs can signal poor targeting or unappealing creatives.
Conversion rate (CVR)
Formula: Orders / Clicks
CVR shows how well your product page converts once shoppers land there.
✅ Pro Tip: If CVR is low, review your product listing, pricing, or customer reviews.
Attributed sales
The revenue generated from clicks on your ads within Amazon’s attribution window (typically 7–14 days). This is the foundation of how Amazon reports ROI on ad campaigns.
✅ Pro Tip: Measuring results is how you move from spending to scaling. By tracking the right metrics and adjusting based on performance, you can continuously improve your ROI and grow your brand on Amazon.
See more Amazon seller key performance indicators (KPIs).
How much should you budget for Amazon advertising?
Our rule of thumb at Beacon Commerce is to take the average cost per click for your product category and multiply that by 1,000 to get the monthly budget.
If you have less money, it limits the placements you can go after and how aggressive you can be for the peak buying times.
If you have a bigger budget, it allows for more aggressive targeting to speed up the time to profit.
Reaching the ROAS profitability zone
Plan to budget for 3-6 months of advertising on the Amazon platform before you reach the profitability zone for your Return On Ad Spend (ROAS).
It’s closer to 3 months to reach profitability if you have a brand people already know about, where you can leverage social and other tactics as noted above.
It’s closer to 6 months if you can’t push customers to Amazon in the early days, as you are spending more time (and money) to get NEW customers.
The first months are spent gathering data on the platform in parallel with growing reviews. This will be the most costly phase of advertisement, because of the investment size.
Months 3 and 4 should revolve around optimizing keywords that ARE converting for product sales. Bid just enough to get the click, but avoid overspending and chasing unprofitable sales.
Eventually, you will begin to see opportunities to be more aggressive and move higher up the funnel, i.e., to compete against tougher competitors. This typically occurs around months 5 and 6.
So we want to make sure that your Amazon advertising budget is properly allocated and focused on profitability. Here’s our top advice for new Amazon sellers, especially smaller brands with a limited marketing budget:
Best practices for analyzing ad results:
- Set a budget for your advertising campaigns and monitor their performance daily to assess budget utilization. Also look at trends over 3, 7 and 30 days to ensure your ad campaigns are profitable.
- Compare performance across campaign types (e.g., Sponsored Products vs. Sponsored Brands) so you can double down on placements that are working more effectively than others.
- Use Amazon Advertising Reports and Brand Analytics to dive deeper into keyword performance, audience behavior, and trends.
- Don’t judge success or failure too quickly—some campaigns take time to mature, especially with long-tail keywords.
Pro tips for Amazon advertising
Trademark your brand
Registering your brand trademark on Amazon dramatically changes your advertising and sales experience on the platform. It unlocks A LOT of value at no additional cost to you, providing enhanced marketing tools including for advertising.
You’ll be able to do headline ads, video ads and display ads that target new customer segments you won’t have access to otherwise.
Sponsored Brands ads, for instance, enable the promotion of your brand and product portfolio through keyword-targeted ads that appear in prominent positions on the search results page. These ads can significantly boost visibility and drive traffic to your Amazon Store or individual product listings.
The Rufus factor
Rufus is Amazon’s AI tool to assist customers with shopping and becoming a more important part of the overall SEO for a brand on Amazon. Rufus will ask customers questions to help direct them to the right page in a more complex way then search keywords did previously.
As part of being ready for Rufus, it is highly recommended to update the keywords and alternative image text to talk about intent of the product to describe the experience rather than just keyword stuffing.
This will ultimately impact the way the Amazon algorithm displays ads to customers which will greatly affect your overall clicks and conversion rates of the products. To ensure that your ads remain effective, watch for changes caused by Rufus. Be proactive in adapting to Rufus’ preferences and capitalize on its opportunities.
Finally, remember that success on Amazon is not a sprint, it’s a marathon
Success on Amazon requires more than a great product. It requires visibility, and that’s where advertising comes in.
When done strategically, Amazon ads can accelerate product launches, deliver a strong return on investment, and grow your brand’s presence on and off the platform.
Whether you’re a solo seller or a scaling brand, advertising is one of the most powerful tools in your Amazon toolbox.
Start small, and build, test, measure and adapt. Stay data-driven: always let your results guide your next move.
With the right strategy and careful monitoring, ads aren’t a cost—they’re an investment in growth.
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