Am I Wasting Money on My Amazon Ads? How Can I Be Sure?

19 Mar

Picture this. You’re sipping your morning coffee, looking over your Amazon ad performance dashboard, and your eyes widen. The numbers don’t lie. You’re spending money - lots of it - but the sales? Meh, not nearly enough to justify the dent in your budget. Sound familiar? If it does, don’t worry - you’re not alone. Wasted ad budget is a problem that many Amazon sellers face, whether you’re just finding your feet or you’re a seasoned pro.

But here’s the good news. With a bit of know-how, a few strategic tweaks, and patience, you can turn your ad campaigns into profitable, well-oiled selling machines. Think of this as your ultimate guide to answering the burning question every Amazon seller has asked at some point, “Am I wasting money on my Amazon ads?” Spoiler alert - by the end, you’ll not only know how to tell but also what to do about it.

How Do I Know If My Ads Aren’t Working? (Tracking the Right Metrics)

First things first, you can’t figure out if your ads are working if you’re focused on the wrong numbers - plain and simple. Metrics are the heartbeat of your campaigns, and tracking the right ones is key to understanding what’s draining your budget.

Here are some MVPs (most valuable players) to keep your eye on:

Total Advertising Cost of Sales (TACoS)

No, not the tasty salsa-topped dish - TACoS is likely the most critical metric worth your attention. It measures your total advertising spend as a % of your total sales, giving you a broader perspective than ACoS.

While ACoS (see below) focuses solely on ad-driven sales, TACoS helps you gauge how your overall advertising efforts are impacting your entire revenue. We’d argue it’s more insightful, offering a complete picture of your ad performance in connection to your total sales figures.

To calculate it divide your total advertising spend by your total sales.

Depending on your category, and how aggressive you are being with your growth strategy, this usually starts at around 30% but should scale down to 10% (or lower) over time.

The key insight it should show you is whether your advertising sales are resulting in more organic sales. If it is, great! Your advertising is doing its job. If it's not, then dig in deeper and find out what can be improved.

Advertising Cost of Sale (ACoS)

This tells you how much you’re spending to make a sale. Lower is usually better, and for many seller niches, a ‘good’ ACoS is around 15-20%.

Here’s how to calculate it:

Divide your ad spend by the sales generated through the ads, then multiply by 100 to get a percentage.

For example, if you spent £50 on ads and generated £250 in sales, your ACoS would be:

(£50 ÷ £250) × 100 = 20%

This means you’re spending 20% of your revenue on advertising. If your ACoS is much higher, it’s worth digging into what’s driving those costs!

Return on Ad Spend (ROAS)

Think of this as ACoS’s mirror - ROAS shows how much revenue you’re generating for every £1 spent on ads. The higher your ROAS, the more bang you’re getting for your buck.

Conversion Rate (CVR)

A high CVR means more clicks turning into sales, maximising your ad spend and boosting profit. Low CVR? It’s wasteful and signals issues with your product page or targeting.

Click-Through Rate (CTR)

While a strong CTR shows your ad is grabbing attention, it’s only part of the story. High clicks without conversions waste your budget, so balance CTR with sales performance for true success. If your CTR is low, your copy or imagery might need a revamp.

Impressions

This shows how many people saw your ads. While impressions don’t directly translate to sales, they can hint at how competitive your ad placement is.

Pro Tip: Don’t just stare at these numbers - act on them. If your ACoS is fine but your conversion rate is poor, dig into why. Perhaps your listings need improvement, or you may be targeting the wrong audience groups?

For instance, if your product page has blurry images or confusing descriptions, shoppers may click but won’t buy. Or if your audience targeting is off, like selling garden tools to city apartments, your clicks won’t convert.

Every metric tells a story; you just need to learn how to read it - and then take action!

What’s Hiding in My Search Term Reports?

Think of your Search Term Reports as Amazon’s equivalent of pulling back the curtain. These reports reveal which search terms are driving traffic to your ads - and which ones are bleeding your budget dry.

How to find your Search Term Reports in Amazon Seller Central:

Go to the Reports tab in your Seller Central dashboard.
From the dropdown menu, select Advertising Reports.
Choose Search Term Report as the report type.
Set the desired date range to capture relevant data.
Click Run Report to generate your report.

After downloading the report, open it to reveal all the insights. You’ll see which search terms triggered your ads, how many clicks each term generated, and whether those clicks turned into purchases.

Use this data to identify top-performing terms and cut out those money-sucking ones that aren’t converting. By mastering these reports, you can fine-tune your campaigns for better results and a healthier ad budget!

Here’s how to use this data like a pro:

Cut Out Irrelevant Terms

Irrelevant search terms can burn through your budget faster than a poorly planned flash sale. Imagine someone searching for “purple socks” but clicking on your ad for black trainers. It’s frustrating, right?

That’s where negative keywords come in - these stop your ads from popping up for searches that won’t convert.

Here’s how you can add negative keywords in Amazon Seller Central:

Log in to your Seller Central account and head to the Advertising tab in the dashboard.
Click on Campaign Manager to open your campaign overview.
Pick a campaign where you suspect irrelevant terms are wasting your ad spend.
Within that campaign, go to the Targeting section.
Locate and click on the Negative Keywords tab for that campaign.
Add the terms you want to exclude, like “purple socks” if they’re affecting your black trainers ad.
Save your changes, and voilà! Those irrelevant terms won’t trigger your ads again.

Examples of Irrelevant Keywords

Selling high-end handbags? Negative keywords like “cheap handbags” or “second-hand handbags” might help filter the wrong audience.
Advertising premium coffee? Add “instant coffee” or “cheap coffee” to keep budget shoppers at bay.

Handle Costly, Non-Converting Keywords

Keywords that drain your budget without delivering results are dead weight in your advertising strategy. But don’t worry - identifying these culprits and taking action can put your campaign back on track. Here’s how to handle them like a pro:

Step 1: Spot the Costly Keywords

Look for keywords with high spend but low or no conversions. For example, a keyword like “budget laptops” might be getting plenty of clicks if you’re selling tech, but if you’re only offering premium models, those clicks likely aren’t turning into sales.

Be on the lookout for terms with poor Return on Investment (ROI). If your ACOS (Advertising Cost of Sale) is climbing for a keyword and there’s no payoff, it’s time to act.

Step 2: Lower the Bids

For keywords that are still somewhat relevant but just aren’t performing as strongly, try lowering your bids. By reducing your bid amount, you’re telling Amazon that you don’t want to compete as aggressively for these terms. This can help control costs and improve your profitability.

Step 3: Add Negative Keywords

As we mentioned before, if certain search terms are pulling in irrelevant traffic, they need to be shown the door. Add them as negative keywords to stop your ads from showing up when someone uses that term.

Step 4: Keep the Cycle Going

Optimising isn’t a one-and-done task. Regularly review your Search Term Reports to catch new problem keywords. It’s all about continuous refinement so you can keep squeezing better results from your ad spend.

With these steps, you’ll master the art of trimming the fat from your campaigns. Fewer wasted clicks, smarter spending, and more profits - sounds pretty good, doesn’t it?

Am I Looking at the Full Picture? (Segmenting Data for Insights)

Here’s a mantra to live by for your Amazon campaigns - don’t lump it all together. Aggregated data can hide the story behind the numbers.

Instead, segment that data!

Here’s how you can break it down to uncover the good, the bad, and the money pits:

Campaign Type

When it comes to Amazon advertising, each campaign type has unique strengths. Here’s a quick breakdown to help you decide where to concentrate your efforts:

Ad Group

Not all keywords are created equal, and some will outperform the rest. By reallocating your ad spend towards top-performing keywords, you’re not just boosting your ROI - you’re also identifying your winners. This approach shines a spotlight on which keywords are driving sales and which ones are falling flat.

Meanwhile, your low-performing keywords become clearer, giving you the chance to either optimise them, lower bids or cut them out altogether. Think of it as refining your strategy - spend smart, perform better, and make every click count.

Keywords

Identifying winners and losers is essential to optimising your campaigns. Here’s how to do it quickly:

Click-Through Rate (CTR)

High CTR? Your keyword is grabbing attention. Low CTR? It may not match user intent or your ad copy needs work.

Conversion Rate

Strong conversion rates show your clicks are turning into sales. Low rates? You’re attracting interest, not buyers - time to reconsider its value.

ACOS (Advertising Cost of Sales)

A lower ACOS signals efficiency. If a keyword’s ACOS is sky-high, it might be burning your budget without results.

Products

Every product tells a different story. Imagine running ads for a reusable water bottle. It’s pulling in clicks but barely converts, leaving your ACOS through the roof. Meanwhile, a travel coffee mug consistently drives sales and keeps ACOS low.

If the bottle keeps draining your budget with little return, it might be time to pause its ads or rethink your strategy. Focus on winners like the mug to get more bang for your buck. Sometimes, it’s better to play favourites!

Should I Tinker?

Amazon ads aren’t something you can set and forget - sorry! Regular tweaks are what separate the good campaigns from the great ones.

If something’s working, give it a boost.

If something’s flopping, scale it back.

Testing Makes Perfect

Testing is how you discover what really clicks with your audience. Without it, you’re flying blind. Here’s how to make testing a habit:

Try A/B Testing Ad Creatives

Got an ad image? Try another variation. Change the headline or feature a different product benefit. See which version gets more engagement.

Experiment with Targeting

Your target audience might not always be who you expect. Run tests to try new demographics, search term combinations, or bid placements.

Test Bidding Strategies

Explore manual bidding versus automation or adjust daily limits. Small tweaks can reveal big insights into what’s driving results.

Remember, Patience is Key

Testing isn’t about instant wins - it’s about learning. Give your tests enough time to collect meaningful data, then use the results to improve step by step. Each test is a chance to sharpen your strategy and uncover what your audience truly values.

By combining thoughtful adjustments with consistent testing, you’ll create campaigns that evolve and keep outperforming themselves!

What If I Need Help?

The truth is, that optimising Amazon ads takes time. If you don’t have hours to spend poring over metrics or running A/B tests, it’s okay to ask for help.

At This Way Up, we’ve got a team of ad experts, consumer psychologists, data analysts, and even former Amazon insiders who live for this stuff. We can help you optimise your campaigns so every £ you spend pulls its weight - and then some. Sound good? Get in touch.

Let’s Recap

Before you go, here’s a quick recap to keep you on track:

Track the Right Metrics: Keep a close eye on TACoS, ACoS, ROAS, CVR, CTR, and impressions to gauge ad performance.
Analyse Search Term Reports: Regularly weed out irrelevant or high-cost, low-converting search terms.
Segment Your Data: Break down your campaigns by type, ad group, keyword, and product for clearer insights.
Tinker and Test: Continuously adjust bids and experiment with ad creatives and strategies to find what works.
Ask for Help When Needed: Professional support can save you time and amplify results.

Amazon advertising doesn’t have to be a guessing game. By following these steps, you can go from feeling like you’re throwing money into the wind to confidently knowing that every penny of your budget is working for you.

Still unsure? We’re here to help. Reach out today and let’s make sure your Amazon ads are everything they should be.

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Lucy Clarke