Your Amazon Ads Are About to Get More Expensive. Here’s Why
Amazon, Alphabet and Meta spent 160 billion on AI in a single quarter, and someone has to pay for it. The hosts break down why that bill is heading towards sellers through higher ad costs and fees, and what to do before Q4 peaks.
In this episode: A look at the Q3 earnings from Amazon, Alphabet and Meta, what the AI spending race means for advertising costs and seller fees, and a practical checklist for protecting your profit this quarter.
Key takeaways
Ad costs per order are rising while clicks fall, and AI spending is pushing platforms to squeeze more from advertisers and sellers.
Fees, seller reserves and warehouse capacity charges are other likely places Amazon will recover cash.
Monitor TACOS and account profitability daily, audit listings for conversion, and be careful with new Amazon campaign types.
Timestamps
00:00 Office hours announcement
00:16 What we are covering: 160 billion on AI in one quarter
01:04 How Anthropic affects Amazon’s net income
02:19 Why ad costs are rising and clicks are falling
03:39 Who pays for the AI spending
05:50 New ad types: full funnel, DVA+ and sponsored prompts
07:29 Why Q4 ad costs rise anyway
08:06 Fees and seller reserves
09:28 Upcoming fee changes and recategorisation
10:14 A theory on warehouse capacity charges
12:00 AI shoppers and why conversion matters more
12:45 Alphabet’s half trillion drop in value
15:36 The love hate relationship with Amazon
16:48 What sellers should do now
18:06 Conversion rate and AI agents
18:54 Bonus tips: bidding strategy, reach off Amazon, new campaigns
The detail
Ad costs are rising because the AI bill has to be paid. In Q3, Meta’s impressions rose 10% while its price per ad rose 14%, and its revenue rose 26%, so growth came from higher prices rather than more ads. Amazon’s ad revenue rose 11% even with Prime Day in Q2, and cost per click has been climbing. Amazon is funding its AI spending from its own cash, so sellers, through ads, fees and commissions, are effectively the funders. The new full funnel, DVA+ and sponsored prompts campaigns take control out of your hands and can spend freely, so treat them with care. Our episodes on the FTC ad auction case and the unBoxed announcements give more context.
Fees, reserves and capacity are the other pressure points. Amazon has been increasing how long and how much it holds in seller reserves, without disclosing the figure per seller. First party sellers should expect tougher negotiations on co-op fees, chargebacks and price increases. Further changes are on the way, including a US FBM prepaid label requirement, a large product recategorisation with new size tiers and fees, and an overhaul of the US fee calculator in January, so audit your account for products that have changed tier. Sellers can also bid for extra warehouse capacity, which costs cash up front even if it is reimbursed on sell through.
Protect your profit and your conversion rate. Monitor campaigns closely, track TACOS rather than only ROAS, consider AI bidding tools, and use a profitability tool such as Sellerboard or MerchantSpring to watch every fee daily. With clicks falling and AI shoppers rising, audit your listings before Black Friday so no conversion points are hiding, and make sure they answer the questions your product solves. See how to catapult your conversion rate and looking at ACOS the wrong way. Finally, set the Amazon bidding strategy to down only, watch the increase reach off Amazon setting, and monitor any new campaign types closely.
Work with us
Worried about rising ad costs this Q4? Let us audit your campaigns and account profitability. Get in touch.
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