> ## Documentation Index > Fetch the complete documentation index at: https://www.laurence.com/docs/llms.txt > Use this file to discover all available pages before exploring further. # The Auction > How Amazon decides whether your ad shows and what a click costs, as we have measured it On Amazon, raising a bid mostly buys entry into more auctions, and the price of a click is usually your own bid or close to it. Amazon describes its auction as second-price, but our own measurements and the FTC's August 2026 complaint both say most clicks are priced at the winner's bid. ## What a bid is A **bid** is the most an advertiser will pay for one click on one target (a keyword or a product). Every time a shopper searches or opens a product page, Amazon runs an **auction** among the eligible ads and decides which ads show and in which slots. The advertiser pays only when the shopper clicks; that payment is the **cost per click (CPC)**. Two campaign-level settings change the bid that enters the auction: **placement modifiers** and **dynamic bidding**, both covered below. ## What a bid buys The textbook picture is that a higher bid buys a better slot at a higher price. What we measure is different: a higher bid mostly buys **more auctions entered**, so more impressions and clicks, and the price moves much less than the click count. In July 2026 we measured this causally. We randomly raised and lowered bids on the accounts we manage, so changed and unchanged keywords could be compared like an experiment. Across those accounts: * A bid raise of 8.6% bought 23.2% more clicks per hour (95% interval 17.1% to 29.3%) and 30.6% more impressions. * A bid cut of 18.1% cost 39.4% of clicks (95% interval 32.6% to 45.6%). * All three placements moved together. * How much of a raise showed up in the price paid differed by placement: about 0.9 of it on Top of Search, about 0.6 on Rest of Search, and close to none on Detail Pages. * The extra clicks converted slightly worse, at 0.927 times the rate of the existing clicks. So the first-order effect of a bid is participation: whether the ad is in the auction and wins a slot at all. [Organic and Paid](https://www.laurence.com/docs/amazon/organic-and-paid.md) covers what showing up does for impressions. ## How the price is set In a **second-price auction**, the winner pays just above the second-highest bid, so bidding your true value is safe: you never pay your full bid unless a rival bid almost the same. Most guides describe Amazon this way. Our data does not fit that picture. The price behaves like **the lower of your bid and a market price**: when the market price is above your bid you pay your bid, and when it is below you pay the market price. A large share of clicks is charged exactly the bid. In the July 2026 measurement, the share of click volume priced at the bid was 58% on Top of Search, 64% on Detail Pages and 72% on Rest of Search. That share depends on how "at the bid" is measured and over what window; a later and wider analysis found an even larger share of clicks priced at the bid. > [!WARNING] > > Do not reason about Amazon bids as if the auction were second-price. When most clicks are charged the bid itself, "bid your value and the auction will charge you less" stops being true: a bid set exactly at a click's value earns close to zero profit on those clicks. ## The FTC case On August 31, 2026, the Federal Trade Commission and 22 states sued Amazon in the U.S. District Court for the Western District of Washington (case 2:26-cv-03097) over how it priced Sponsored Ads. These are allegations; the case is unresolved. The complaint alleges that: * Amazon told advertisers, through its website, training material and account managers, that prices were set by a generalized second-price auction, where a winner pays one cent more than the next-highest bidder. * Starting in late 2018 and early 2019, Amazon replaced the auction's price with a higher price it calculated itself, a surcharge it internally called a "soft reserve" price. The Senior Vice President in charge of Amazon Ads is quoted saying the second price "isn't set by an actual bidder" but is a "proxy 2nd price that we calculate." * The share of Sponsored Products clicks priced at the winner's own bid (Amazon's internal "first-price rate") rose to between 30% and 40% in 2021, 70% in 2022, and close to 80% by 2024. In Sponsored Brands, Amazon allegedly set the price for 70% of clicks and charged the full bid 50% of the time. * Surcharges were higher on peak shopping days; the complaint says they more than doubled CPCs during Prime Day 2023. * Amazon knew advertisers bid as if the auction were second-price. In 2024, the Sponsored Products manager overseeing auction pricing wrote internally that "many advertisers bid far higher than what they are willing to pay…\[b]ecause they assume its GSP." * Over seven years, Amazon extracted over 20 billion dollars from advertisers this way. The complaint's first-price rate of close to 80% sits inside the range we measured independently on our own accounts before the suit was filed. It explains why bidding a click's full value is a mistake on Amazon. ## One search auction, a separate detail page auction We treat Top of Search and Rest of Search as one search auction (one bid competes for both, and the ranking decides which slot it gets), and Detail Page as separate inventory with its own auction. It is an **unmeasured belief**: we have not settled whether Detail Page is a later auction or a continuation of the same ranked list. ## Placement modifiers A campaign can raise its bid separately for each placement with a **placement modifier**, a percentage added to the base bid. A Top of Search modifier of +100% turns a \$1.00 bid into a \$2.00 bid for that placement only. Amazon accepts up to +900%. The catch is that a modifier is set once per campaign, while keywords inside one campaign want very different modifiers: * Across the accounts we manage (July 2026), 24% of keyword and placement cells sat more than 50 points away from their campaign's modifier, and a campaign's own placement ratio drifted about 0.24 (log standard deviation) week to week. How modifiers buy Top of Search share is on [Placements](https://www.laurence.com/docs/amazon/placements.md). ## Dynamic bidding **Dynamic bidding** is a campaign setting that tells Amazon whether it may change our bid at auction time: | Setting | What Amazon does with the bid | | - | - | | `Fixed bid` | Uses our bid exactly | | `Dynamic bids, down only` | May lower our bid at auction time | | `Dynamic bids, up and down` | May raise or lower our bid at auction time | Our campaigns default to down only. ## What we have measured | Fact | Evidence | Source | | - | - | - | | A +8.6% bid buys +23.2% clicks and +30.6% impressions; a −18.1% bid costs 39.4% of clicks | `Measured` | Randomized bid changes on our managed accounts, Jul 31 2026 | | Price follows a raise by about 0.9 on Top of Search, 0.6 on Rest of Search, close to 0 on Detail Page | `Measured` | Same scan, Jul 31 2026 | | Extra clicks from a raise convert at 0.927 times the existing rate | `Measured` | Same scan, Jul 31 2026 | | Share of click volume priced at the bid: 58% Top of Search, 64% Detail Page, 72% Rest of Search | `Measured` | Same scan, Jul 31 2026 | | Top of Search and Rest of Search share one auction; Detail Page is separate | `Unmeasured belief` | Our working assumption | | Placement modifiers go up to +900% | `Amazon-documented` | Amazon Ads documentation | | 24% of keyword and placement cells sit more than 50 points from their campaign's modifier | `Measured` | Our managed accounts, Jul 31 2026 | | Dynamic bidding offers fixed, down only, and up and down | `Amazon-documented` | Amazon Ads API campaign setting | | Our campaigns default to down only | `Our convention` | Our default | This documentation is built and hosted on [Mintlify](https://mintlify.com), a developer documentation platform.