First-price auction

First price means the clearing price is your bid — no automatic step down to the runner-up. Amazon Publisher Services, Amazon's publisher-side marketplace, is openly first-price: highest bid wins in a unified auction, with Amazon DSP bidding alongside third-party buyers, and a $2 CPM bid entering at $1.80 after the 10% fee. Sponsored ads are a separate system Amazon does not call first price. Amazon says it has priced clicks since 2006 with a form of generalized second-price auction, layered since roughly 2019 with a hard reserve (the floor a bid must clear) and a soft reserve (a real-time estimate of the placement's worth). Clear both and you pay the soft reserve, less than your bid; clear only the hard reserve and you pay your own bid.

The FTC reads the same machinery differently: its August 31, 2026 complaint alleges the soft reserve is a hidden surcharge replacing the second-price outcome, citing an internal plan that put the 2024 Sponsored Products first-price rate at 79.1%. Amazon denies it and offers its own figures — about 92% of selected Sponsored Products ads in 2024 were not the highest bid. Nothing has been adjudicated. So measure: compute realized CPC divided by the bid you entered, keyword by keyword and placement by placement. A ratio pinned near 1.0 means your headroom is imaginary. Step the bid down in increments — CPC that holds flat, then drops to your bid, points at a reserve. Size bid ceilings from break-even margin, not from a discount you assume the auction will hand back.