How to Reduce CPM in Amazon DSP

Amazon DSP (Demand-Side Platform) has become one of the most powerful programmatic advertising solutions available today. It allows brands to reach shoppers across Amazon-owned properties like Amazon.com, Fire TV and IMDb, as well as thousands of third-party websites and apps. With its unique access to Amazon first-party shopper data, DSP gives advertisers unmatched targeting capabilities.

But running campaigns on DSP is not just about reach — it is about efficiency. One of the key metrics advertisers focus on is CPM (Cost per Mille), which is the cost to serve 1,000 impressions. A high CPM means you are paying more for visibility, which can quickly drain your budget. By lowering CPM, you can stretch your ad spend further, increase reach and improve overall campaign efficiency.

In this guide, we will explore why CPM matters in Amazon DSP, the factors that influence it and actionable strategies to reduce it without compromising performance.

Why CPM Matters in Amazon DSP

• Budget efficiency: Lower CPM means more impressions for the same budget
• Broader reach: Reducing CPM allows you to expose your brand to more potential customers
• Improved ROI: By keeping costs under control, you can allocate budget toward audiences and creatives that deliver better results
• Competitive advantage: Brands with lower CPM can dominate impression share without overspending

Optimizing CPM is about finding the balance between cost and performance.

What Influences CPM in Amazon DSP?

Several factors affect how much you pay per thousand impressions:

1. Audience type: Highly specific or niche audiences (like cart abandoners) often come at a higher CPM compared to broader lifestyle segments
2. Ad format: Video ads usually cost more than static display ads. Interactive formats can also drive up CPM
3. Placement: Premium placements, such as Fire TV or high-visibility third-party sites, may have higher CPMs than standard placements
4. Competition: If many brands are bidding on the same audience, CPM will rise
5. Frequency: Showing ads too often to the same users increases cost without necessarily improving efficiency
6. Creative quality: Poor-performing creatives can lead to wasted impressions, indirectly raising CPM

Understanding these factors is the first step in reducing CPM.

Strategies to Reduce CPM in Amazon DSP

1. Broaden Your Audience Targeting

Narrow targeting often leads to higher CPM because you are competing for fewer impressions. To bring costs down:

• Combine similar audience segments
• Expand into lifestyle or in-market audiences instead of relying only on retargeting
• Use lookalike audiences to find new shoppers similar to your best customers

This widens the pool of available impressions and reduces competition.

2. Optimize Frequency Capping

Serving the same ad too many times to the same user increases cost without improving conversions. Frequency capping ensures you limit impressions per user.

• For awareness campaigns: allow a slightly higher cap to build recognition
• For retargeting campaigns: keep frequency lower to avoid ad fatigue

Balanced frequency improves efficiency and reduces wasted spend, which helps lower CPM.

3. Test Different Ad Formats

Video ads often deliver stronger engagement but come with higher CPMs. If your goal is cost efficiency, balance video with static display ads.

• Use static ads for broad awareness
• Use video selectively for storytelling or retargeting high-intent audiences

This mix can help reduce overall CPM while maintaining performance.

4. Optimize Bids Strategically

Amazon DSP runs on a CPM bidding model. By adjusting your bids, you can control costs.

• Lower bids for audiences or placements with low performance
• Increase bids only where data shows strong conversion potential
• Use dynamic bidding to let Amazon automatically adjust based on conversion likelihood

Smart bidding keeps CPM under control while ensuring impressions go where they matter most.

5. Improve Creative Performance

CPM is not just about bidding — it is also about how well your ads perform. Better creatives mean higher engagement, which can improve efficiency.

• Use clear, high-quality visuals
• Highlight strong value propositions such as discounts, eco-friendly features or best-seller status
• Test multiple creatives and rotate them regularly to prevent fatigue

AI-powered tools can analyze which creatives deliver the lowest effective CPM and guide your creative strategy.

6. Refine Placement Strategy

Not all placements are equal. Premium sites may cost more but do not always deliver better results.

• Analyze placement reports to identify high-cost, low-performing sites
• Shift budget toward placements that generate strong engagement at lower CPM
• Exclude irrelevant or underperforming placements from your campaigns

This ensures your budget goes to impressions that actually drive results.

7. Use Lookback Windows Wisely

Lookback windows define how far back you want to target shoppers who engaged with your brand. Longer windows may expand audience size but can dilute efficiency. Shorter windows, while more precise, can raise CPM due to limited audience availability.

Test different lookback windows (for example, 7 days vs 30 days) to find the balance between scale and cost.

8. Segment Campaigns by Objective

Running all goals in one campaign can make optimization difficult. Separate campaigns by objective — awareness, consideration, conversion — and allocate bids and creatives accordingly.

This makes it easier to identify where CPM is too high and adjust without affecting the entire campaign.

9. Monitor Competition and Seasonality

During high-demand seasons (like Prime Day or holidays), CPM often spikes due to increased competition. To manage costs:

• Plan budgets in advance to avoid last-minute bidding wars
• Shift spend to less competitive periods if possible
• Focus on retargeting during peak seasons to maximize efficiency

10. Continuously Test and Optimize

Reducing CPM is an ongoing process. Regularly test different:

• Audiences
• Creatives
• Bidding strategies
• Placements

AI tools can automate this testing by analyzing performance data and recommending adjustments in real time.

Example: Reducing CPM for a Home Appliances Brand

Imagine you are running DSP campaigns for a brand selling air purifiers.

1. Initial challenge: CPM is high because campaigns are heavily focused on retargeting product detail page visitors
2. Optimization:
   • Expand targeting to include in-market audiences searching for home appliances
   • Add lookalike audiences based on past buyers
   • Introduce static display ads alongside video ads
   • Apply frequency caps to limit impressions to three per user per week
   • Exclude premium placements with high CPM but low engagement
3. Result: CPM decreases by 25 percent, impressions increase significantly and conversions remain steady

Common Mistakes to Avoid

1. Over-narrow targeting: Too much precision can drive CPM higher
2. Ignoring frequency capping: Overexposure leads to wasted spend
3. Failing to refresh creatives: Stale ads drive down engagement and efficiency
4. Not monitoring placements: Allowing budget to flow into high-cost, low-performance sites wastes money
5. Only chasing the lowest CPM: Reducing CPM without considering conversions can harm overall campaign effectiveness

How AI Can Help Reduce CPM

AI enhances CPM optimization by:

• Predicting which audiences are most cost-effective
• Automating bid adjustments in real time
• Analyzing placements and excluding poor performers
• Testing creative variations faster than manual processes
• Identifying seasonal or competitive trends that affect costs

By combining AI-driven insights with human strategy, advertisers can significantly reduce CPM while maintaining or even improving performance.

Final Thoughts

Reducing CPM in Amazon DSP is about balancing cost with performance. By broadening audience reach, optimizing frequency, refining creatives, adjusting bids and monitoring placements, you can stretch your budget further and deliver more impressions without overspending.

AI adds another layer of intelligence by automating adjustments, uncovering insights and ensuring campaigns remain efficient even in competitive environments.

The brands that succeed with Amazon DSP are those that treat CPM optimization as an ongoing process, not a one-time adjustment. If you consistently test, analyze and refine your campaigns, you can lower CPM while still driving strong engagement and conversions.