The short version
- Ask what share of your ad budget goes to branded versus non-branded terms. Branded search converts at around 90% to 95%, so spending there buys sales you'd have got anyway while the report looks excellent.
- Percentage-of-ad-spend pricing points the agency at growing your spend. Ask how they're paid before you ask how they perform.
- Nobody in this category publishes pricing, which means you have to ask, and the answer should include what you take home after their fee, not just what they charge.
- There's a test you can run on your own account: pull spend back on a non-branded term you hold strong share on, and see whether the share drops.
- No good agency works on commission only. The ones that say yes staff your account with people they can afford to lose.
What's in here: the branded-terms question · why the fee model shapes the advice · what to ask about pricing · the test you can run yourself · what else you should be learning · when an agency isn't worth it yet
The most common way an Amazon agency report flatters itself has nothing to do with lying. Every number is accurate. The account returns four times what it spends, the chart climbs, and the brand is pleased.
Then you ask which searches the money went to.
Ask any prospective Amazon PPC agency what percentage of your ad budget goes to branded terms versus non-branded terms, because branded search converts at roughly 90% to 95% and spending there buys sales you had already earned. My lead brand manager calls this the biggest manipulation in reporting he's seen in his career, and he isn't describing fraud. He's describing an agency optimizing honestly for the number you asked about.
Why does the branded versus non-branded split matter so much?
Because those two kinds of spend do completely different jobs, and only one of them grows your business.
Someone typing your brand name into Amazon has already chosen you. They saw you in a store, heard you on a podcast, got a recommendation. That shopper converts at around 90% to 95% almost regardless of what your listing does, because the decision happened before they arrived.
Bidding on your own brand name captures those shoppers and books them as ad-attributed revenue. Your return on ad spend looks superb, because it's measuring conversions that were nearly certain. Meanwhile nobody new has discovered you.
Non-branded terms are where growth lives, and they're harder. The shopper doesn't know you, conversion is lower, and the reported return looks worse. An agency judged solely on return on ad spend is being paid to avoid exactly the work that would grow the account.
There's a legitimate version of branded spend, and I want to be fair about it. Defending your own brand terms matters, because competitors will bid against your name and a shopper searching for you should find you. An always-on branded campaign at low spend is good practice. The problem is when that defensive campaign is most of the budget and the report presents it as growth.
How should an Amazon agency be paid?
Look at the incentive before you look at the price, because the fee model decides what advice you'll get for the next year.
Percentage of ad spend is the one I'd push back on hardest, and we don't use it. If an agency earns more when you spend more, they have a reason to recommend spending more, and you'll never fully know which recommendations came from your account and which came from theirs. A flat fee removes that conflict: the agency has no stake in your budget size, only in keeping you happy long enough to stay.
Percentage of channel revenue is what we use, and I'll defend it on one specific ground. Rebuilding a listing brings in customers who never click an ad, so billing only on ad-attributed sales would undercount the work and push us toward being an ads-only operation. Charging on what the channel produces keeps us responsible for the whole thing.
Commission only, with no floor, sounds like the safest option for you and is usually the worst. No good agency will go underwater to work with you, so the ones who accept commission-only terms staff your account with junior people they can afford to lose if it doesn't work. If your reason for wanting it is that you've been burned before, that's a reasonable instinct pointed at the wrong solution. Ask for a shorter initial term instead.
What should I ask about pricing?
Ask for the number, and ask what you keep after it.
Nearly nobody in this category publishes pricing. We looked across the agencies we track and found almost none of them stating a figure anywhere public, which means every buyer runs the same frustrating process of booking calls to get a number.
So ask directly, early, and ask a second question most brands don't think of: does the profitability you're showing me include your fee?
That question matters more than it sounds. A client worked this out on a call with us and said it better than I would have. Her Amazon channel was running at roughly 20% net margin, our fee came off the bottom of that, and at around 15% she said the channel started to look like a liquidation channel rather than a profit one. She was right, and we were the ones who'd shown her the P&L that let her see it.
Any agency that can't tell you what the channel contributes after its own fee is either not modeling it or not sharing it, and neither answer is good.
Is there a test I can run on my own account?
Yes, and it's the practical version of the branded-terms question.
Find a non-branded search term where you hold strong market share. Amazon's search query performance report will show you impressions, click share, add-to-cart share and purchase share by keyword, so you can identify one where you're already winning a decent slice of the category.
Then deliberately pull ad spend back on that term, and watch what happens to your share.
If share holds, that spend was buying sales you were getting anyway, and it can go somewhere useful. If share drops, the spend was doing real work and you've confirmed it. Either answer is worth having, and it costs you a few weeks of a controlled experiment rather than an argument with your agency about whose interpretation is right.
One honest complication: this is harder when you're already number one in your category, because there's less room to cut without surrendering impression share you'd struggle to win back. The test is most useful in the middle of the pack, which is where most brands are.
What else should an agency be teaching me?
Ask what you'll learn besides whether you made money, because marketing should be producing answers and sales are only one of them.
A good engagement should be telling you which claims actually convert, which pack size sells best and at what price, which competitors take share from you and on which terms, whether your product has real demand or you've been buying it, and where the category is heading. Those are answers you keep even if the relationship ends.
Ask about campaign hygiene too. My brand manager audited an account recently and found eight versions of the same sponsored product campaign, launched, paused and relaunched with inconsistent bids. That churn costs you, because campaigns accumulate historical relevance and a duplicate never performs like the one it replaced. Copying a campaign and killing the original throws away something you paid to build.
And ask what they'd do before running ads. If the answer doesn't include the listing, be careful. Ads buy qualified traffic and the listing decides whether it converts, so an agency happy to spend your money against an unoptimized page is selling you the expensive half of a two-part job.
When is an agency not worth it yet?
When the math says so, and a good agency will tell you.
Run the rough calculation. At a healthy pre-ad gross margin, with a typical management fee and a modest ad budget, most brands need to be doing somewhere around five figures a month on Amazon before an agency clears its own cost. Below that, you're paying for management out of a channel too small to carry it.
I've turned work away on this. One prospect's monthly Amazon sales were small enough that our minimum would have been over a third of their revenue, which is absurd and I said so. The right advice for that brand was to fix their listings and pricing themselves first, and I'd rather give it than take the retainer.
The other version is category size. I've declined to pitch a retainer to a brand whose category search volume was too thin for the channel to ever cover the fee, however well we ran it. We set up a small always-on branded campaign to protect their name and told them to come back when the groundwork elsewhere was done.
If an agency has never once told you that you're not ready, ask yourself whether they'd know.
Frequently asked questions
How much does an Amazon PPC agency cost?
Most work on a monthly retainer, a percentage of channel sales, or a combination, and figures in this category are rarely published so you'll have to ask. The more useful question is what you keep after the fee. Ask them to show you the channel's profitability including their own cost, and be wary if they can't.
What's the single best question to ask an Amazon agency?
What percentage of my ad budget goes to branded terms versus non-branded. Branded search converts at around 90% to 95%, so heavy branded spend produces excellent-looking reports while capturing sales you had already earned. A confident agency will have the number and an explanation for it.
Should I pay an agency a percentage of ad spend?
I'd avoid it. It gives the agency a direct financial reason to recommend a larger budget, and you'll never be certain which advice came from your account and which came from their incentive. A flat fee or a percentage of channel revenue both keep the interests closer to aligned.
Will an agency work on commission only?
Some will, and it's usually a bad sign. No agency can afford senior operators on an account that might pay nothing, so commission-only arrangements are staffed with people the agency can afford to lose. If you want to limit your risk, ask for a shorter initial term rather than a contingent fee.
How do I know if my current agency is doing a good job?
Look past return on ad spend at the branded and non-branded split, at whether new-to-brand customers are growing faster than you're losing existing ones, and at whether your organic rank is improving so you're buying less of your own demand over time. Ask what they've learned about your category this quarter. A good agency will have an answer ready.
How big does my Amazon business need to be before hiring an agency?
Roughly five figures a month is where the math usually starts to work, though it depends on your margin and the size of your category. Below that, management fees eat a share of a channel too small to carry them, and you're better off fixing the listings and pricing yourself first.
The bottom line
The uncomfortable truth about this category is that a competent agency and a coasting one produce reports that look almost identical, and the difference only shows up in questions most brands don't know to ask.
So ask the branded-terms question on your next call, whoever you're talking to. If the answer is confident and specific, you've learned something good. If it's vague, you've learned something more useful.
And if you want a second read on what your current account is doing, send us your ASINs and we'll tell you what we see, whether or not there's a conversation after it. We've never regretted giving away the analysis.
You're not being difficult by asking hard questions about your own money. You're doing the job.
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