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How much should I spend on Amazon advertising?

Kelly

Account Performance Manager at Amersify

Introduction

“How much should we spend?” — it’s the question every brand asks.

And, like most things on Amazon, there’s no fixed answer. Your ad budget should evolve with data — not guesswork — balancing visibility, profitability, and growth.

This guide explains how to build a realistic Amazon Ads budget, interpret it through both ACOS and TACOS, and ensure every pound spent contributes to profitable scaling.

1. The Role of Budget in Amazon Advertising

Your ad spend isn’t just about driving sales — it powers the entire Amazon ecosystem:

It fuels visibility and keyword rank.
It feeds the algorithm enough data to optimise campaigns.
It grows organic performance over time.

Tip: Underfunded campaigns never gather enough data for Amazon’s algorithm to learn properly. This keeps CPCs artificially high and limits visibility, especially during breakout stages or seasonal peaks.

2. Typical Ad Spend Benchmarks (2025)

Seller Type	Revenue	Typical Ad Spend (% of Revenue)	Target TACOS
Small Brand (<£25k/month)	£25k	10–15%	10–15%
Growing Brand (£25k–£100k/month)	£100k	8–12%	8–10%
Established Brand (£100k–£500k/month)	£500k	5–10%	6–9%
Enterprise/Vendor (>£500k/month)	£500k+	3–8%	5–8%

Context: Smaller brands often need higher spend percentages to gain rank. Mature brands generally shift focus toward defence and profit optimisation once growth stabilises.

3. ACOS vs TACOS: The Budgeting Balance

ACOS (Advertising Cost of Sales)

Measures how efficiently your ads perform.

Formula: ACOS = (Ad Spend ÷ Ad Revenue) × 100

TACOS (Total Advertising Cost of Sales)

Tracks how ad spend impacts total business revenue.

Formula: TACOS = (Ad Spend ÷ Total Revenue) × 100

Why It Matters:

You can’t determine a sustainable ad budget by ACOS alone. It shows efficiency within ad sales but doesn’t reveal total profitability. A falling TACOS, on the other hand, indicates that ads are contributing to organic growth — the most reliable measure of sustainable scale.

Tip: Set budget strategy from both TACOS and ACOS perspectives. Chasing only a low ACOS can make short-term results look efficient but often limits growth potential.

2025 Note: Advanced advertisers can also reference TROAS (Total ROAS), a blended cross-format efficiency metric introduced in late 2024. TROAS combines DSP and Sponsored Ads data for a full-funnel performance view, making it helpful for large multi-channel campaigns.

4. How to Calculate a Starting Budget

Define your target monthly revenue (example: £50,000).

Set a target ACOS based on profit margins and goals (example: 25%).

Formula: Ad Spend = Target Revenue × Target ACOS

Example: £50,000 × 0.25 = £12,500 monthly ad budget.

Then check alignment with your TACOS target — ideally between 7–12% of total revenue.

Budget Check Insight:

If ACOS looks positive but TACOS is flat, your advertising activity may not be generating incremental growth — you’re simply recycling existing demand rather than expanding it.

5. Key Factors That Influence Ad Spend

Factor	Impact
Competition	High-CPC categories like electronics or supplements require larger budgets.
Product Price Point	Lower-ticket items often need higher spend share to drive meaningful volume.
Lifecycle Stage	Product launches need heavier spend for visibility and review momentum.
Seasonality	Expect CPC increases of 25–50% during Q4 and major events like Prime Day.
Ad Type Mix	Sponsored Display and DSP campaigns typically require higher CPMs.

Insight: When your margins allow, reinvest in aggressive early-stage advertising. Frontloading budget during the growth period builds long-term ranking stability and reduces long-term TACOS.

6. How to Scale Spend Safely

Scaling isn’t simply about spending more — it’s about spending with intent and efficiency.

Step 1: Monitor TACOS Trends

If TACOS stays level or drops as spend increases, your campaigns are scaling profitably.

Step 2: Increase Budget Gradually

Raise daily budgets by no more than 20% per week to maintain optimal learning. Sudden jumps interrupt the algorithm and cause volatility.

Step 3: Reinvest Incremental Profit

Use profits from high-return campaigns to test new ad formats such as Sponsored Brands Video, DSP, or dynamic retargeting.

2025 Updates:

Dynamic Budget Rules: Amazon now allows automated budget scaling when campaigns exceed performance thresholds (e.g., high CTR or conversion rates). This ensures budgets expand only during conditions that justify additional spend.
Budget Recommendations: Integrated within the Ads Console, this feature flags campaigns likely to go dark early based on conversion potential. This helps advertisers avoid missing peak conversion windows.
Spend Forecast Curves: Predictive analytics now visualise how incremental spend affects sales potential — ideal for planning during Prime events or seasonal pushes.

7. Recommended Budget Split by Ad Format

Ad Format	Recommended % of Budget	Purpose
Sponsored Products	50–60%	Core conversion driver
Sponsored Brands	20–25%	Awareness and brand defence
Sponsored Display	10–15%	Retargeting and upper-funnel reach
DSP	10–20%	Full-funnel storytelling and audience expansion

Tip: Always build a strong Sponsored Products foundation before committing higher spend to upper-funnel formats.

2025 Update:

Use Amazon Marketing Stream’s hourly data insights to adjust budgets dynamically. For example, shift spend toward hours with proven ROAS performance and away from low-converting time periods to improve total efficiency.

8. Common Budgeting Mistakes

Avoid measuring success by ACOS alone — it fails to reflect organic contribution.

Avoid cutting budgets the moment ACOS increases — doing so disrupts rank-building progress.

Avoid setting static budgets for all campaigns — Amazon’s auction dynamics shift daily.

Avoid mixing branded and unbranded campaigns in analysis — it clouds true efficiency.

Pro Insight:

Regularly review TACOS trends month to month. A declining TACOS with stable sales signals that your ad investment is improving organic visibility — a vital aspect of sustainable profitability.

FAQs

What’s more important — ACOS or TACOS?

Both are necessary, but TACOS better indicates account-wide profitability. It reveals whether advertising spend is generating organic contribution.

Should I pause ads when sales slow down?

No. Maintain activity at reduced budgets to preserve rank and keep algorithms learning.

What’s a good starting daily budget?

Between £20–£50 per campaign, adjusting for competitiveness and product pricing.

Can I share budgets between campaigns?

Yes. Portfolio Budgets are ideal for grouping related products and letting high-performing campaigns use available headroom.

Summary

Your Amazon advertising budget should deliver one goal: profitable business growth.

That means moving beyond short-term ACOS targets and budgeting with TACOS insight. When done right, your ad spend strengthens your organic ranking, stabilises profitability, and positions your brand for continued expansion.

In 2025, new console tools such as Dynamic Budget Rules, Budget Recommendations, and Amazon Marketing Stream allow smarter, data-led scaling decisions than ever before.

At Amersify, we help brands balance efficiency and growth — because profit without momentum stalls progress, and growth without profit increases risk.