Amazon's average prices for sponsored product ads were 48% higher in Q1 2025 than in Q1 2019, compared to a 41% rise on Google ad prices, a 37% rise on Instagram, and a 24% decrease on Facebook, according to data from the Tinuiti ad agency.
The increase in ad prices, along with new ad placements that litter customers' shopping experiences across every page, have helped turn Amazon’s ads business into a $56B a year empire. However the rising cost of ads may also be causing some sellers to switch to offering discounts and coupons (which have also recently gotten more expensive), or at times, move their ad dollars to other platforms.
Revenue growth from the Amazon Ads division fell to just under 20% last year, compared to more than 24% in 2023, down sharply from the more than 50% growth in advertising for 2021 and 2020. Despite the plateauing growth, Amazon is now the third-largest recipient of online ad dollars in the US.
The consequence of those ads? Higher prices for customers.
The average price of goods sold by 3P sellers on Amazon rose by 6.7% from December 2023 to December 2024, according to SmartScout's Amazon Inflation Tracker, outpacing the Consumer Prices Index, which rose 2.9% during the same period.
Scott Needham, CEO of SmartScout, says that rising FBA fees are at the heart of the price increases, which is why nearly 65% of third-party sellers increased their prices on the marketplace last year.
39.5% of Amazon Prime members said they noticed significantly higher prices versus a year ago for household essentials items.