Amazon Advertising: From ACoS to Full-Funnel Strategy

The $600 Billion Shelf You Can't Ignore

Amazon advertising revenue crossed $56.2 billion in 2024, according to their Q4 earnings report. That number grew 20% year-over-year. And with Amazon holding 37.6% of all U.S. e-commerce sales per eMarketer's 2025 forecast, the platform isn't just a marketplace anymore — it's the default product search engine for most American households. If you sell physical products online and you're not running Amazon ads, you're leaving money on the table. If you are running them but treating every campaign the same way you did two years ago, you're probably burning through budget faster than you realize.

This guide walks you through the five stages of Amazon advertising maturity. Not theory. Not "best practices" that apply to nobody in particular. This is the actual progression that brands follow as they grow from first campaign to full-funnel dominance. Whether you're spending $500 a month or $500,000, you're somewhere on this path.

The difference between brands that thrive on Amazon and those that tread water usually comes down to one thing: knowing which stage they're in and executing the playbook for that stage, not the one before it or the one after.

Stage 1: Launch (Your First Sponsored Products Campaigns)

Starting With What Works

Every Amazon advertising journey starts with Sponsored Products. There's a reason for that. They're the simplest ad format, they appear right in search results where purchase intent is highest, and they account for roughly 75% of all Amazon ad spend according to Perpetua's 2025 marketplace report. Start here.

Your first campaigns should be built on three pillars:

1. Automatic campaigns for keyword discovery. Amazon's algorithm tests your product against relevant searches. You learn what converts.
2. Manual exact match campaigns for your top 10-15 keywords. These are the searches you know your product should show up for.
3. Product targeting campaigns against direct competitors. If someone is looking at a comparable product, you want to be in the "Sponsored products related to this item" section.

Keyword Research That Actually Matters

Forget guessing. Amazon gives you tools, and third-party platforms fill in the gaps. Start with Brand Analytics if you have Brand Registry (and you should). The Search Query Performance dashboard shows you exactly what shoppers search for, how often, and what they click. Pair that with Helium 10 or Jungle Scout for search volume estimates and competitor keyword mapping.

A common mistake at this stage: targeting only high-volume keywords. A keyword with 50,000 monthly searches and 200 competing sponsored placements will eat your budget alive. Mix in long-tail keywords with 500-2,000 monthly searches where competition is thinner and intent is sharper. "Stainless steel water bottle" costs you $2-4 per click. "32 oz insulated water bottle with straw lid" might cost you $0.60-0.90 and convert twice as well.

I've seen brands cut their average CPC by 35-40% just by shifting half their keyword portfolio from head terms to long-tail phrases. The volume per keyword is lower, but the aggregate volume across dozens of long-tail terms often matches or exceeds what you'd get from a handful of head terms — and the shoppers converting on those specific phrases tend to have higher purchase intent because they already know exactly what they want.

Bid Management Basics

At launch, set your daily budget at $30-50 per campaign and your default bids at roughly your break-even ACoS level. If your product sells for $25 with a $10 margin and a 10% conversion rate, your break-even cost per click is $1.00. Start your bids there and adjust after you have data.

Do not touch bids for at least 7-10 days. Amazon's algorithm needs time to learn where your ads perform. Changing bids daily is the single most common mistake new advertisers make. It resets the learning process and gives you noisy data you can't act on.

Use "dynamic bids, down only" at this stage. Amazon will lower your bid when a click is less likely to convert, but won't increase it beyond your max. This protects your budget while the algorithm learns.

Stage 2: Optimize (Making Every Dollar Count)

Understanding and Managing ACoS

ACoS (Advertising Cost of Sale) is the metric that dominates this stage. It's simple math: ad spend divided by ad revenue, expressed as a percentage. If you spend $20 in ads to generate $100 in sales, your ACoS is 20%.

But here's what most guides won't tell you: your target ACoS depends entirely on your margins, your goals, and your product lifecycle. Ad Badger's 2025 benchmark report puts the platform-wide average ACoS at 30.4%, which means half of all advertisers are running above that. A new product launch might justify a 50-60% ACoS to build ranking velocity. A mature product with a 25% margin should target 15-20% ACoS for profitable growth. The benchmarks below are based on aggregated seller data and industry benchmarking reports from 2024-2025:

Category	Average ACoS (2025)	Target ACoS (Profitable)	Source
Electronics & Accessories	22-30%	15-20%	Industry benchmarks, 2024-2025
Health & Personal Care	18-25%	12-18%	Industry benchmarks, 2024-2025
Home & Kitchen	20-28%	14-20%	Industry benchmarks, 2024-2025
Grocery & Gourmet	15-22%	10-15%	Industry benchmarks, 2024-2025
Beauty & Cosmetics	20-26%	13-18%	Industry benchmarks, 2024-2025
Pet Supplies	18-24%	12-17%	Industry benchmarks, 2024-2025
Toys & Games	25-35%	18-25%	Industry benchmarks, 2024-2025

Negative Keywords: Your Budget's Best Friend

After 2-3 weeks of running automatic campaigns, pull your Search Term Report. You'll find three things:

• Winners: Search terms with good conversion rates and acceptable ACoS. Move these into manual exact match campaigns with higher bids.
• Maybes: Search terms with clicks but no sales yet. Give them more time if the term is relevant, or lower bids.
• Losers: Search terms that are irrelevant or have spent significantly with zero conversions. Add these as negative exact match keywords immediately.

Run this process weekly. A brand spending $5,000/month on Amazon ads can easily waste $500-1,000+ on irrelevant search terms if they are not managing negatives actively. We've found that the first negative keyword audit typically removes 20-30% of wasted spend, and that savings compounds every month as you refine the list further.

Day-Parting and Budget Pacing

Amazon's ad console now supports day-parting (they call it "campaign scheduling by time of day"). Use it. Your conversion rates are not the same at 3 AM as they are at 7 PM. Pull your hourly performance data from campaign reports and identify your peak conversion windows.

For most consumer products, conversion rates peak between 6-10 PM local time and during lunch hours (11 AM-1 PM). B2B products on Amazon Business tend to convert during standard work hours. Increase bids 15-25% during peak windows and decrease them 20-30% during off-peak hours.

A/B Testing Your Listings

Advertising drives traffic. Your listing converts that traffic. If your conversion rate is below category average, no amount of ad optimization will save you. Amazon's "Manage Your Experiments" tool (available with Brand Registry) lets you A/B test titles, images, bullet points, and A+ Content.

Test one element at a time. Run each test for a minimum of 4 weeks to get statistical significance. Start with your main image, because that's the biggest conversion lever on the search results page. Then test your title. Then price positioning if you have flexibility.

Stage 3: Expand (Beyond Sponsored Products)

Adding Sponsored Brands

Once your Sponsored Products campaigns are profitable and you've built some review velocity, it's time to add Sponsored Brands. These are the banner ads at the top of search results that feature your brand logo, a custom headline, and up to three products.

Sponsored Brands serve a different purpose than Sponsored Products. They're brand-building placements. Click-through rates tend to be lower (0.3-0.5% vs. 0.4-0.7% for Sponsored Products, per Perpetua's 2025 data), but they drive brand awareness and can send shoppers to your Brand Store, not just a product page.

Sponsored Brands Video is the standout format here. Video ads typically generate 2-3x higher click-through rates than static Sponsored Brands. The CPC tends to run higher than standard placements, but the stronger engagement and conversion rates often deliver better overall ROAS. If you can produce even a basic 15-30 second product video showing your product in use, test this format immediately.

Sponsored Display: Retargeting on Amazon

Sponsored Display ads reach shoppers who viewed your product but didn't buy, viewed similar products, or match specific audience segments. Think of it as Amazon's retargeting solution.

Two targeting strategies matter most:

1. Views remarketing: Target shoppers who viewed your product listing in the last 7, 14, or 30 days. These are warm audiences. Start with 7-day lookback for the highest conversion rates.
2. Product targeting: Show your ads on competitor product detail pages. This is conquest advertising within Amazon's ecosystem.

Sponsored Display also runs off-Amazon, on sites within Amazon's ad network. This extends your reach beyond the marketplace itself, though on-Amazon placements typically convert at 2-3x the rate of off-Amazon placements.

Feature	Sponsored Products	Sponsored Brands	Sponsored Display	Amazon DSP
Primary Goal	Direct sales	Brand awareness + sales	Retargeting + conquest	Full-funnel reach
Placement	Search results, product pages	Top of search, Brand Store	Product pages, off-Amazon	Amazon + web + streaming
Targeting	Keywords, products	Keywords, categories	Audiences, products, views	Behavioral, demographic, lookalike
Min Budget	$1/day	$1/day	$1/day	$10,000-35,000/month typical
Avg CPC (2025)	$0.80-1.50	$0.70-1.40	$0.50-1.20	CPM-based ($3-8 CPM)
Best For	All sellers	Brand-registered sellers	Retargeting, competitor conquest	Brands spending $50K+/month
Self-Serve?	Yes	Yes	Yes	Managed service or enterprise self-serve

A+ Content as a Conversion Multiplier

A+ Content (formerly Enhanced Brand Content) isn't an ad format, but it directly impacts your advertising ROI. Amazon's own data suggests A+ Content increases conversion rates by 3-10%. When you're paying $1+ per click, even a 5% conversion lift translates to meaningful savings.

Build your A+ Content around three goals: answer the top objections, show the product in context, and reinforce your brand story. Use comparison charts against your own product line (not competitors, as Amazon's terms prohibit direct competitor mentions in A+ Content). Include lifestyle imagery alongside studio shots.

Premium A+ Content (available to brands enrolled in Brand Registry with a published Brand Story) adds interactive elements, video modules, and larger image carousels. If you qualify, use it. The engagement lift is significant.

Stage 4: Scale (Full-Funnel Thinking)

The TACoS Revolution

At this stage, you need to stop obsessing over ACoS and start thinking about TACoS (Total Advertising Cost of Sale). TACoS measures your ad spend against your total revenue, not just your ad-attributed revenue. This is the metric that tells you whether advertising is actually growing your business or just sustaining it.

Here's why it matters: a well-run advertising program doesn't just generate ad sales. It drives organic ranking improvements, increases brand search volume, and builds repeat purchase behavior. If your ACoS is 25% but your TACoS is 8%, your ads are pulling up your entire business. That 25% ACoS is funding organic growth.

Track your TACoS weekly. A declining TACoS while total revenue grows is the single best indicator that your advertising strategy is working. If TACoS is flat or rising while revenue stays flat, you have a problem: you're becoming dependent on ads without building organic momentum.

Here's a real pattern I've seen play out: a supplement brand launches with a 15% TACoS. Over six months of disciplined keyword targeting and listing optimization, TACoS drops to 9% even as total revenue doubles. Their ad spend went up 60%, but total revenue grew 100% — meaning organic sales filled the gap. That's the flywheel working. Conversely, I've watched brands hold a steady 14% TACoS for a year while total revenue flatlines. Their ads were generating sales, but those sales weren't translating into lasting organic rank improvements. That's a sign the listings themselves, or the review velocity, or the pricing strategy needs attention.

Amazon DSP: The Upper Funnel

Amazon DSP (Demand-Side Platform) is where Amazon advertising gets serious. DSP lets you run programmatic display and video ads across Amazon's owned properties (IMDb, Twitch, Fire TV, Amazon.com), plus thousands of third-party websites and apps.

What makes DSP different from Sponsored Display:

• Audience targeting depth. DSP uses Amazon's first-party shopping data to build audiences based on purchase history, browsing behavior, lifestyle segments, and in-market signals. You can target "people who bought a competitor's product in the last 90 days" or "households that spend $200+/month on pet supplies."
• Streaming TV ads. Amazon's Streaming TV inventory (Freevee, Twitch, Fire TV apps) puts your brand on the big screen. Amazon's Streaming TV ads can drive significant lifts in branded search and product detail page views, according to Amazon's advertising case studies.
• Full-funnel measurement. Amazon Marketing Cloud (AMC) connects DSP impressions to eventual purchases, even if the purchase happens weeks later. This closes the attribution gap that plagues most upper-funnel advertising.

DSP requires a minimum monthly commitment, typically $10,000-35,000 depending on whether you work with Amazon's managed service or a certified partner. It's not for everyone. But if you're spending $30,000+ monthly on Sponsored Products and Brands and you're hitting a ceiling, DSP is how you break through.

Budget Allocation by Maturity Stage

How you split your budget should shift as you mature. Here's what we typically recommend:

Maturity Stage	Sponsored Products	Sponsored Brands	Sponsored Display	DSP	Typical Monthly Spend
Stage 1: Launch	90-100%	0%	0-10%	0%	$1,000-5,000
Stage 2: Optimize	75-85%	10-15%	5-10%	0%	$5,000-15,000
Stage 3: Expand	55-65%	15-20%	15-20%	0-5%	$15,000-50,000
Stage 4: Scale	40-50%	15-20%	10-15%	20-30%	$50,000-200,000
Stage 5: Dominate	30-40%	15-20%	10-15%	30-40%	$200,000+

Integrating Organic and Paid Strategy

At the Scale stage, your digital shelf strategy and your advertising strategy must be the same strategy. Every advertising dollar should reinforce your organic position. Every organic listing optimization should improve your ad efficiency.

This means:

• Keyword alignment. The keywords you bid on aggressively should be the keywords in your title, bullets, and backend search terms. Amazon's A10 algorithm gives ranking credit for keyword-specific sales velocity, whether those sales come from organic or paid.
• Product feed quality. Your product data feeds (titles, descriptions, attributes, images) affect both organic search placement and ad relevance scores. Poor product data means higher CPCs and lower organic visibility.
• Buy Box stability. If you lose the Buy Box, your ads stop running. Period. Monitor your Buy Box percentage daily. If it drops below 95%, fix the underlying issue (pricing, fulfillment method, seller metrics) before increasing ad spend.

Stage 5: Dominate (Market Share and Total Integration)

Competitive Conquest at Scale

At this level, you're not just advertising your products. You're defending market share and taking it from competitors. This requires a deliberate conquest strategy.

Amazon Brand Analytics gives you the data. The Search Query Performance dashboard shows your brand's share of search impressions, clicks, and purchases for every relevant keyword. The Top Search Terms report shows you exactly which competitors are winning on your target keywords and how their click share compares to yours.

Build dedicated conquest campaigns targeting competitor ASINs and branded keywords (where Amazon's terms allow it). Monitor your share of voice on your top 50 keywords. When a competitor launches a new product or runs a promotion, increase your defensive bids on shared keywords by 20-30% for 2-3 weeks to prevent them from gaining ranking momentum.

Amazon Marketing Cloud: The Data Layer

Amazon Marketing Cloud (AMC) is the analytics platform that ties everything together. It's a clean-room environment where you can query Amazon's advertising data at the event level. AMC lets you answer questions like:

• What's the average path to purchase? How many ad touchpoints does a customer interact with before buying?
• Which ad format combination drives the highest lifetime value?
• What percentage of DSP-influenced shoppers go on to purchase organically within 14 days?
• How does new-to-brand acquisition from Sponsored Brands compare to Sponsored Products?

AMC is free for advertisers using DSP. If you're spending at the Stage 5 level and not using AMC, you're making budget allocation decisions with one eye closed. The brands that dominate their categories on Amazon are the ones using AMC data to continuously shift spend toward the highest-value touchpoints.

Retail Media as Part of a Bigger Picture

Amazon is the largest player in the retail media network space, but it's not the only one. Walmart Connect, Target Roundel, Instacart Ads, and Kroger Precision Marketing are all growing rapidly. eMarketer's 2025 forecast pegs U.S. retail media ad spend at $62 billion, with Amazon commanding roughly 78% of that. Globally, GroupM's 2024 forecast puts retail media at $125 billion worldwide — a figure that's grown faster than any other digital ad category over the past three years.

At the Dominate stage, your Amazon strategy should inform (and be informed by) your broader retail media approach. The audiences, creative assets, and bidding strategies you develop on Amazon can transfer to other platforms. The ROAS benchmarks you establish on Amazon set expectations for what you should demand from Walmart or Instacart.

Think of Amazon as your testing ground. It has the most mature ad platform, the best measurement tools, and the largest audience. What works there can be adapted everywhere else.

New-to-Brand Metrics and Long-Term Growth

Amazon reports "new-to-brand" metrics for Sponsored Brands and Sponsored Display campaigns. This tells you what percentage of your ad-driven purchases come from customers who haven't bought from your brand in the past 12 months. For brands at the Dominate stage, this is arguably more important than ACoS or ROAS.

Why? Because a mature brand on Amazon has two growth levers: increase purchase frequency among existing customers, and acquire new customers. If your new-to-brand percentage drops below 40-50%, your ads are mostly re-acquiring existing customers. That's not growth. That's maintenance. Shift budget toward upper-funnel formats (Sponsored Brands, DSP awareness campaigns) to bring fresh shoppers into your ecosystem.

Seasonal Strategy and Promotional Calendar

Brands that dominate Amazon plan their advertising calendar 12 months out. Key planning moments include:

• Prime Day (July): CPCs increase 30-50% the week of. Front-load your budget 2-3 weeks before when competition is lighter. Run Lightning Deals with increased ad support.
• Back to School (August-September): Second-highest traffic period for many categories. Start ramping bids in late July.
• Q4 Holiday (October-December): CPCs can double. Set separate budgets for Q4. If you're capping out daily, you're losing sales to competitors who planned further ahead.
• January reset: CPCs drop 20-40% in January. This is the cheapest time to acquire new customers and test new campaigns.

Skai's Prime Day analyses consistently show that brands which increase ad spend significantly during the event see outsized returns on that incremental investment, provided they have sufficient inventory and competitive pricing. The key is planning ahead: secure inventory, prep creative, and set separate Prime Day budgets well in advance.

Common Mistakes at Every Stage

Mistakes That Cost Real Money

After managing Amazon ad campaigns across dozens of brands and millions in spend, these are the errors we see most often:

1. Running automatic campaigns forever without harvesting keywords. Auto campaigns are for discovery. If you're not moving winning search terms into manual campaigns monthly, you're paying a "laziness tax" of 15-25% higher ACoS.
2. Ignoring placement modifiers. Amazon lets you adjust bids by placement (top of search, rest of search, product pages). Top of search placements convert 2-4x higher than other placements. Increase your top-of-search modifier by 25-50% and watch what happens to your conversion rate.
3. Treating all products the same. Your hero SKUs (top 20% by revenue) deserve 60-70% of your ad budget. Your long-tail products get the rest. Spreading budget evenly across your catalog is a fast way to achieve mediocre results everywhere.
4. Not accounting for organic rank changes. When you start advertising a keyword and drive sales, your organic rank improves. As organic rank improves, you can lower your bid and still maintain visibility. If you never reduce bids on keywords where you rank organically on page one, you're overpaying.
5. Skipping Sponsored Brands Video. We mentioned it earlier, but it bears repeating. This is consistently the highest-performing ad format on Amazon by ROAS, yet many brands skip it because video production feels intimidating. A simple product demo shot on a phone, edited to 20 seconds with text overlays, outperforms most studio-produced content.

Measurement Framework: What to Track at Each Stage

The Metrics That Matter

Not every metric matters at every stage. Here's what to focus on:

Stage 1-2 (Launch and Optimize): ACoS, CPC, conversion rate, impressions, click-through rate. These are your efficiency metrics. Get them right before scaling.

Stage 3 (Expand): Add branded search volume, new-to-brand percentage, and total organic rank changes for your top 25 keywords. You're now measuring whether ads are building your brand, not just driving sales.

Stage 4-5 (Scale and Dominate): TACoS becomes your north star. Add share of voice (from Brand Analytics), customer lifetime value (from AMC), and cross-channel attribution. At this level, you're measuring market position, not just campaign performance.

Set up weekly reporting cadence for tactical metrics (ACoS, CPC, spend, sales) and monthly reporting for strategic metrics (TACoS, share of voice, new-to-brand). Quarterly, do a full portfolio review where you re-evaluate budget allocation across ad formats and product lines.

Frequently Asked Questions

What's a good ACoS for Amazon advertising?

It depends on your margins and goals. For established products with 30%+ margins, target an ACoS of 15-20%. For new product launches, you might accept 40-60% ACoS for the first 60-90 days to build ranking and reviews. The right ACoS is one that keeps you profitable while growing market share. Check the benchmark table above for category-specific ranges.

How much should I spend on Amazon advertising per month?

Start with 10-15% of your Amazon revenue as an advertising budget. If you are launching new products, budget 20-25% of projected revenue. Scale based on TACoS performance, not arbitrary budget caps.

Should I use Amazon DSP or stick with Sponsored Products?

Amazon DSP makes sense when you've maxed out your Sponsored Products and Brands efficiency and you're spending $30,000+ monthly. DSP is an upper-funnel investment that drives awareness and new customer acquisition. If you're still optimizing basic Sponsored Products campaigns, DSP spend will feel wasteful. Master the self-serve ad formats first, then layer on DSP when you need to break through a growth ceiling.

How long does it take to see results from Amazon ads?

Expect 2-3 weeks to gather enough data for meaningful optimization. Real momentum typically builds over 60-90 days as you refine keywords, improve listings, and accumulate reviews from ad-driven sales. Brands that stick with a disciplined optimization routine for 6 months almost always outperform those that chase quick wins or constantly restructure campaigns.

What's the difference between ACoS and TACoS, and which should I focus on?

ACoS measures ad spend against ad-attributed revenue only. TACoS measures ad spend against your total revenue, including organic sales. Early on, focus on ACoS to build efficient campaigns. Once you're spending $10,000+ monthly and have a mix of ad formats running, shift your attention to TACoS. A declining TACoS with growing total revenue means your advertising is fueling organic growth, which is the ultimate sign of a healthy Amazon business.

Building Your Amazon Advertising Engine

Amazon advertising isn't a set-it-and-forget-it channel. It's a compounding system. Every dollar spent wisely today improves your organic rank, builds your review count, increases your brand recognition, and makes tomorrow's dollar more efficient. I've worked with brands that turned a $10,000 monthly ad budget into a $50,000 monthly revenue stream within nine months, and the common thread was always the same: they invested in the fundamentals at each stage before jumping to the next one. The brands winning on Amazon in 2025 and beyond are the ones that treat advertising as a growth engine, not a cost center.

Whether you're at Stage 1 or Stage 5, the principle is the same: know where you are, run the right playbook for that stage, and keep moving forward. Skip stages and you waste money. Stay too long at one stage and competitors pass you by.

If you're ready to accelerate your Amazon advertising performance, our E-Commerce Strategy offering is built specifically for brands that want to move faster through these maturity stages. From product feed optimization and listing strategy to full-funnel campaign management and DSP execution, we help brands turn Amazon into their most profitable growth channel. Get in touch to talk about where you are today and where you want to be.