The state of Amazon Advertising in 2026

With advertising revenue of more than 60 billion US dollars per year, Amazon is the third-largest advertising platform in the world, behind Google and Meta. For sellers, that means one thing: the platform is getting more professional, the competition tougher and the costs higher.

Average CPCs (cost per click) have risen by around 30-40% over the past three years. In highly competitive categories such as supplements, electronics or household goods, CPCs for head keywords now sit between $1.50 and $3.00. For smaller sellers, growing profitably through Sponsored Products alone is becoming increasingly difficult.

At the same time, Amazon has massively expanded its advertising ecosystem. Sponsored Brands Video, Sponsored Display with audience targeting, Amazon DSP (Demand-Side Platform) and the Amazon Marketing Cloud offer new ways to reach customers across the entire purchase journey. Anyone who ignores these formats and relies on Sponsored Products alone is leaving potential on the table.

Definition

The Amazon Marketing Cloud (AMC) is a cloud-based analytics tool that sellers and agencies can use to gain cross-channel advertising insights. AMC combines data from various Amazon ad formats and enables custom analyses of customer behavior.

Rising CPCs: why it's happening and what you can do about it

The rise in CPCs has several causes. First, more and more sellers are pushing onto the platform, including large brands with substantial ad budgets. Second, Amazon has increased the number of ad slots in the search results, which paradoxically drives click prices up because more competitors bid for more slots. Third, Amazon Advertising is increasingly becoming the standard for aggregators and large portfolios, which raises the overall price level.

The answer to rising CPCs is not simply to throw more budget at the problem. Instead, you need to work on three levers:

Lever 1: Improve your conversion rate

A higher CPC is bearable when more clicks turn into purchases. Conversion rate is the single strongest lever against rising CPCs. Invest in better product images, A+ Content, optimized titles and bullet points, competitive pricing and more reviews. Every additional percentage point of conversion rate lets you pay higher CPCs profitably.

Lever 2: Use long-tail keywords

The most expensive keywords are the short, generic head terms ("men's running shoes"). Long-tail keywords ("men's waterproof trail running shoes") have lower CPCs, higher conversion rates and less competition. A strategy that systematically identifies and targets long-tail keywords noticeably lowers your overall ACoS.

Lever 3: Diversify your ad formats

Sponsored Products alone keeps getting more expensive. Sponsored Brands Video and Sponsored Display often deliver cheaper CPCs at comparable or better performance. Diversify your advertising portfolio instead of betting everything on a single channel.

Practical tip

Analyze your top 20 keywords by CPC trend. If a keyword's CPC has risen by more than 25% over the past 3 months, check whether the conversion rate still justifies it. If not, shift budget to long-tail variants of the same keyword.

AI-powered bidding: the new standard

Manual bid management quickly hits its limits as portfolios grow. Anyone running 100 or more campaigns, each with dozens of keywords, cannot possibly optimize every bid manually every week. AI-powered bidding is therefore no longer a luxury but a necessity.

AI-based systems go beyond simple if-then rules. They analyze historical performance data, recognize patterns in times of day, days of the week and seasonal trends, and adjust bids proactively. The advantage over manual optimization: speed and scalability. An algorithm can make 10,000 bidding decisions in minutes, something that would take a human weeks.

Amazon's own "Dynamic Bids: Up and Down" is a simple form of algorithmic bidding. External tools like Sellantica go further and factor in additional variables such as inventory levels, margins, daily budgets and keyword clusters. The key is to give the algorithm clear target values (target ACoS, maximum CPC) and to feed it enough data.

One important insight for 2026: AI bidding works best in combination with human strategy. The algorithm optimizes the bids, but the strategic decisions (which products to advertise, which keywords to prioritize, when to scale) are yours to make.

Video ads: the underrated format

Sponsored Brands Video is one of the most effective formats on Amazon and is still underrated by many sellers. Video ads appear inline in the search results and stand out visually because they contrast with the static product images. The click-through rate is often 2-3x higher than with classic Sponsored Products.

What makes video ads especially valuable: they let you show a product in action, demonstrate USPs visually and build emotional connections. This is particularly relevant in categories where products need explanation or can be visually differentiated.

Best practices for Amazon video ads in 2026

  • Length: 15-30 seconds. The first 3 seconds decide whether the customer keeps watching.
  • Format: Square or vertical (1:1 or 9:16) for mobile users, who now account for over 70% of Amazon traffic.
  • Content: Show the product immediately, no long intros. Present a problem and a solution. Use text overlays for users watching without sound.
  • CTA: A clear call to action at the end. Amazon automatically places a "Buy now" button beneath the video.
  • Quality: Professional production is ideal, but well-made smartphone videos can work too. Authenticity beats gloss.

CPCs for video ads are often 20-40% lower than those of Sponsored Products for the same keywords. The reason: fewer competitors use the format because producing videos is more effort than booking keywords. That's exactly where the opportunity lies for sellers who are willing to invest in video content.

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Full-funnel strategy: from first touch to loyal customer

The biggest strategic shift in Amazon PPC over the past few years is the move from pure performance advertising (click = purchase) to a full-funnel approach. The funnel has three stages:

Stage 1: Awareness (upper funnel)

Goal: make customers who don't yet know your product or brand aware of you. Formats: Sponsored Brands (especially Video), Sponsored Display with audience targeting on related interests. KPIs: impressions, click-through rate, new customers (New-to-Brand metric).

At this stage, you won't see a low ACoS. That's normal and intended. You're investing in reach and awareness. The ROI comes in the lower funnel stages.

Stage 2: Consideration (mid funnel)

Goal: convince customers who are searching for products in your category to choose your offer. Formats: Sponsored Products on relevant category keywords, Sponsored Brands with Store Spotlight, Sponsored Display retargeting on customers who viewed but didn't buy your product. KPIs: click-through rate, detail page views, add-to-cart rate.

Stage 3: Conversion (lower funnel)

Goal: bring purchase-ready customers over the finish line. Formats: Sponsored Products on exact-match top keywords, brand keywords, Sponsored Display retargeting on cart abandoners. KPIs: conversion rate, ACoS, ROAS.

The full-funnel approach requires a rethink of your reporting. Instead of evaluating each campaign in isolation by ACoS, you look at the overall picture: how much am I spending on advertising in total, and how are total revenue and market share developing? The awareness campaign at 60% ACoS can make sense if it leads to more organic sales and a higher market share.

Definition

TACoS (Total Advertising Cost of Sales) measures advertising costs as a share of total revenue (organic + paid). A falling TACoS alongside rising total revenue shows that your advertising is driving organic growth. TACoS = ad spend / total revenue x 100.

Brand defense: protecting your own brand

Brand defense campaigns are no longer an optional measure in 2026, they're a must. If you don't bid on your own brand keywords, your competitors will. The result: customers searching specifically for your brand see a competitor's ad first.

Here's how brand defense works: you create a separate campaign with your brand name and key product names as exact-match keywords. The bid can be low (brand keywords typically have high conversion rates of 20-40%), but you have to be present.

Why brand defense is so profitable

  • Low CPCs: Since you're the most relevant seller for your own brand, you often win the auction with the minimum bid.
  • High conversion rate: Customers searching for your brand already have purchase intent.
  • Protection from competitors: You prevent competitors from siphoning off your brand traffic.
  • Lowest ACoS: Brand campaigns usually have the lowest ACoS in your entire portfolio.
Practical tip

Use brand campaigns for cross-selling too. When a customer searches for "Your Brand Product A," show them Product B and C via Sponsored Brands as well. This increases customer lifetime value and average order size.

Launching new products: the PPC strategy

Launching a product without a PPC strategy is barely possible in 2026. Building organic visibility takes weeks or months. PPC delivers traffic immediately and gives you the data you need to optimize your listing and your offer.

Phase 1: First 2 weeks

Start with an automatic campaign and a manual broad-match campaign. The goal is data collection. Set a generous daily budget (at least double what you want to spend long term) and accept a higher ACoS. You need clicks, impressions and first orders to build relevance signals.

Phase 2: Weeks 3-4

Analyze the search term reports. Which keywords generated orders? Move them into phrase-match and exact-match campaigns. Set negative keywords for irrelevant searches. Adjust bids based on the first data.

Phase 3: Weeks 5-8

Optimize and scale. Raise bids for profitable keywords. Pause keywords with no orders (after at least 20-30 clicks). Launch Sponsored Brands Video to boost CTR. Begin Sponsored Display retargeting for customers who viewed but didn't buy your product.

Phase 4: From week 9 onward

You're in steady-state operation. Now it's about continuous optimization: keyword migration through the match types, regular bid adjustments, A/B testing of creatives, and the gradual reduction of ACoS to your target level.

Scaling profitable campaigns

Scaling is the holy grail of Amazon PPC. More revenue at a stable or falling ACoS. It sounds simple, but it's one of the biggest challenges, because more spend almost always leads to a higher ACoS.

The reason: the most profitable keywords are eventually tapped out. To generate more revenue, you have to move to broader, more expensive keywords. The consequence: your average ACoS rises.

Strategies for profitable scaling

Strategy 1: Vertical scaling. Gradually raise bids on your best keywords to win more impressions and clicks on already proven keywords. Use top-of-search placement modifiers. ACoS stays stable because the keywords are already profitable.

Strategy 2: Horizontal scaling. Expand your keyword set through systematic long-tail research. Analyze search term reports for new terms with orders. Test related categories and audiences via Sponsored Display. New keywords mean new revenue sources.

Strategy 3: Format diversification. Test formats you haven't used yet. Sponsored Brands Video can deliver cheaper CPCs for the same keywords. Sponsored Display audience targeting reaches customers who aren't reachable via keywords. Every additional format is an additional revenue channel.

Practical tip

Never scale everything at once. Pick one strategy, implement it, measure the results over 2-3 weeks, then decide whether to keep scaling or choose a different approach. Controlled growth beats aggressive growth in the long run.

Measuring success holistically

The biggest trap in Amazon PPC is fixating on the ACoS of individual campaigns. ACoS matters, but it doesn't tell the whole story. For a strategic assessment you need additional metrics:

TACoS (Total Advertising Cost of Sales)

TACoS relates your advertising costs to total revenue (organic + paid). A falling TACoS alongside rising total revenue is the best sign that your PPC strategy is working. It means advertising is driving organic growth and you're not becoming ever more dependent on paid traffic.

New-to-Brand (NTB)

This metric shows how many of your ad-attributed purchases come from new customers (customers who haven't bought from you in the past 12 months). A high NTB share justifies a higher ACoS, because you're investing in customer acquisition.

Organic rank uplift

Track how your organic ranking for your top keywords develops while your PPC campaigns are running. If organic rankings rise, you can reduce PPC spend on those keywords in the medium term. If they fall, you're too dependent on paid traffic.

Advertising profit (not just ROAS)

ROAS (Return on Ad Spend) is a ratio, not an absolute value. A campaign with a ROAS of 10 and $100 in revenue is worth less than a campaign with a ROAS of 4 and $10,000 in revenue. Always evaluate campaigns by the absolute profit they generate as well.

Conclusion: strategy beats tactics

Amazon PPC in 2026 is more complex than ever. But the good news is: those who think strategically have a decisive advantage over sellers who merely react. The most important principles for a successful 2026 PPC strategy:

  • Diversify your formats. Sponsored Products alone is no longer enough. Video ads and Sponsored Display offer opportunities that many competitors aren't yet using.
  • Think in funnels. Not every campaign has to be directly profitable. Awareness campaigns contribute to overall success.
  • Automate operationally, think strategically. AI bidding for bid optimization, human intelligence for strategic direction.
  • Protect your brand. Brand defense campaigns are the most profitable campaigns in your portfolio.
  • Scale in a controlled way. Vertical and horizontal scaling instead of blindly raising budgets.
  • Measure overall success. TACoS, NTB and organic rankings give a more complete picture than ACoS alone.
  • Invest in conversion rate. The most sustainable lever against rising CPCs is a better listing that turns more visitors into buyers.

The sellers who succeed in 2026 won't be the ones with the biggest budget. They'll be the ones with the smartest budget: deployed with precision, optimized with data and aligned strategically toward long-term growth.