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Everything you need to know about Amazon advertising, including the different types of ads, how much it costs and how to optimise campaign performance.
Amazon is the world’s largest online marketplace with more than half of all product searches now taking place on the platform. This means Google is no longer the top destination for product searches and Amazon now has the visitor clout to build an advertising network that could fracture the duopoly of Google and Facebook.
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Amazon’s ad network is growing at a much faster rate than the top two, as well, and the eCommerce giant has benefited greatly from the post-Covid surge in online shopping. The company reported a 37% YoY sales increase in Q3 2020, cementing its position as the go-to platform for online product purchases.
So, if you’re not already advertising on Amazon Ads, now is a good time to take a closer look at the platform.
Amazon Advertising is a PPC platform that allows you to promote products on the world’s leading online marketplace. Much like shopping campaigns in Google Ads, you show your products in promoted listings and you only pay a fee when someone clicks on your ad.
Amazon is essentially a product search engine and this means advertising on the platform mainly revolves around the search experience – much like Google and Bing, as opposed to social platforms like Facebook and Instagram.
For example, users type in keywords to find products and you can target these keywords (specific products, brand names, product types, etc.) with your ads to show your listings to the most relevant audiences.
However, unlike Google and Bing, Amazon is purely an eCommerce platform where users go to find products and nothing else. Nobody turns to Amazon to check the weekend’s weather report or find out who the UK’s first prime minister was. They only use Amazon to find and buy products, which means purchase intent is as high as it gets on the marketplace and this is great news for retailers advertising on the platform.
The company has heavily expanded its ad products over the past couple of years so, even if you’ve taken a look at Amazon Ads before, you may not have seen some of these ad formats before.
In many ways, these are similar to text ads in Google Ads, appearing above the top of search results on Amazon or in between the results themselves. You choose which products you want to advertise, bid on three different types of keywords (broad, phrase and exact) and your ads will show with a small ‘sponsored’ tag.
Sponsored Product Ads are quick to set up, require very little maintenance and get your ads seen by people actively searching for the kind of products you sell. When a user clicks on your ad, they’re taken to the product detail page and you can target these users with remarketing ads if they don’t buy from the first viewing.
While Sponsored Product ads look almost identical to regular Amazon product listings, Sponsored Brands include your logo, a custom headline and up to three products.
Naturally, these campaigns are most effective for companies with a strong brand image and they’re great for targeting broader searches, too. For example, a company selling consumer electronics goods can create Sponsored Brands campaigns for category types, such as headphones and TVs, featuring their top three products in each category and target users who aren’t yet looking for specific products by name.
Sponsored Display Ads show across Amazon and third-party sites, much in the same way Google Display Ads do. They allow you to reach users across the entire customer journey and this is also the ad format your Amazon remarketing campaigns will use.
One thing that makes Amazon’s Sponsored Display Ads different from Google’s is that you can use them to get your products seen on similar or complementary product pages. So you can target someone looking to upgrade their computer’s graphics card with ads for a nice, new 4K monitor to go with it – or even one of your own graphics cards to steal the sale from a direct rival.
Amazon Video Ads provide the opportunity to advertise your brand across Amazon, Amazon Prime, subsidiaries like IMDb, devices like Fire TV and third-party websites.
The really interesting thing about Amazon Video Ads is that you don’t have to sell products on Amazon to buy them. So you can target audiences on platforms like Amazon Prime and show video ads to them as they browse for entertainment, which opens up a unique advertising opportunity that you might not expect to find on a marketplace like Amazon.
This ad format is designed to help brands engage audiences during “screen-free moments” in the home, at work or out and about. The ads are delivered through the free version of Amazon Music, which is popular on Alexa-enabled devices, such as Echo and Fire TV.
Ads are played between songs and can run for 10-30 seconds and you don#t even need to sell products on Amazon to run these, meaning any brand can promote themselves through audio ads on Amazon. The ads are sold on a CPM (cost-per-thousand) basis, currently available in the UK, the US and Germany.
In terms of creating and managing advertising campaigns, Amazon Ads isn’t all that different from Google Ads. Amazon is a search engine itself and Promoted Products basically function in the same way text ads do in Google Search.
So the process is, more or less, the same: you create your ad, define your keywords and set your bids.
Once a user types in your target keyword, your ad enters into Amazon’s auction and you compete against the other advertisers bidding on the same keyword. Much like Google Ads, having the highest bid on a keyword gives you the best chance of winning the auction but it’s not the only factor Amazon considers.
Amazon doesn’t publicly state which factors weigh into its auction algorithm but these are the key ingredients we’ve identified:
Much like Google Ads, setting the highest bid doesn’t necessarily mean you win the auction and the ad showing in position one doesn’t always pay the highest CPC. Once again, if you’re already used to managing campaigns on Google Ads, you’re in a good position to optimise your Amazon campaigns for the best performance, looking at the quality of your product pages, relevance of your keywords and the effectiveness of your bid optimisation strategy.
The good news is, it’s generally easier to optimise Amazon campaigns because everything takes place within the platform. When you’re advertising on Google, the performance of your website, the quality of your hosting service and a wide range of other factors – some of which you can’t identify within the Google Ads interface – can hurt campaign performance.
This is less of an issue with Amazon Ads because the customer journey begins and ends on the platform.
However, the biggest benefit of advertising on Amazon is that users go there to buy products. This is the only purpose of Amazon, meaning your ads are seen by people who are ready to pull the trigger on their next purchase. This is why ROI from Amazon campaigns is so high with 59% of brands selling on Amazon saying the platform generates their highest return on media spend of all platforms.
That’s a telling statistic but it shouldn’t come as a major surprise, given the purchase intent that’s inherent in Amazon users. There are downsides to this too though. For example, Amazon isn’t the best platform for building brand awareness or capturing leads at earlier stages of the sales funnel and you don’t get the opportunity to bring visitors to your website.
In terms of ROI vs CPCs, though, Amazon is storming ahead of the other advertising platforms.
If Amazon generates the highest return on investment among the major advertising platforms, how much does it cost to get in on the action? Well, the first metric you might want to look at for this is the average CPC (cost per click) and, depending on where you get your data from, the average Amazon CPC in 2020 ranges from around $0.70 to $0.81, which translates to less than 60p in local money.
Now, the average Google Ads CPC ranges from $1-$2 but this drops all the way down to $0.66 for Google Shopping campaigns, which is the closest equivalent to Amazon Ads.
So the idea that Amazon CPCs are cheaper than Google’s is a little misleading. Likewise, Google Shopping boasts the better average click-through rates at 1.25% vs Amazon’s 0.41%.
However, Amazon pulls well into the lead with one of the KPIs that matters most: conversion rates. While Google Shopping tallies an impressive 1.91% average conversion rate, Amazon offers its advertisers an unrivalled average conversion rate of 10% vs the industry average of 1.33%.
This explains why Amazon advertisers report such impressive ROIs and highlight the value of its users who are already in shopping mode when they see your ads.
That being said, there is an extra expense that comes with advertising on Amazon Ads that we need to mention. When you sell a product through Google Shopping, you pay for the click and nothing else. However, when you sell a product through Amazon Ads, you have to pay for the initial click and, then, pay the seller fees for each sale.
So you need to factor these selling fees into your ROI calculations.
If you don’t like the sound of Amazon’s seller fees, there’s a major benefit to this that you should keep in mind. Google’s priority is to maximise its revenue through clicks and this doesn’t align with your priority of selling the most products and generating the most revenue.
On the other hand, Amazon’s priority is to maximise revenue through ad clicks and product sales, meaning its goals are perfectly aligned with yours. So your selling performance is considered in Amazon’s ad auction and its ad formats are optimised to maximise sales.
Perhaps, more importantly, you know that its automated bidding strategies are optimised to help you maximise sales because this is part of Amazon’s revenue stream. We’re not saying Google doesn’t optimise its own automated bidding strategies to maximise sales as well; it’s just more reassuring to know Amazon has the same goals you do.
In Amazon Ads, there are five crucial KPIs that should guide your optimisation efforts – most of which you should be familiar with if you have any PPC experience on other platforms:
From these five KPIs, you can optimise all of the most important elements of your Amazon Ads campaigns, provided you understand how to interpret them and diagnose potential issues.
If your ads aren’t generating enough impressions, it means you’re either not entering into the Amazon ad auctions often enough or you’re not winning them when you do. So your first task is to reassess your keywords to ensure that you’re targeting the most relevant queries. Next, you need to look at your bids and look into testing higher maximum bids to give yourself a better chance in the actions.
As we explained earlier, though, maximum bids aren’t the only factor to determine success in the auction. So you also want to look at the quality of your product pages, product descriptions, review scores, shipping speed and other marks of a quality seller.
You also need to factor in your conversion rates because Amazon wants to prioritise ads that are most likely to sell products.
Click-through rates are perfect for telling you how compelling your ads are. If your ads are getting impressions but falling short on clicks, there are two key areas you need to address:
Generally speaking, low CTRs on Amazon Ads suggest your ads either aren’t showing for the right searches or the quality of your ads isn’t up to par. If people aren’t interested in your products, they’re not going to click on your ads – so make sure you’re targeting the right keywords to get your ads seen by audiences most likely to buy your product.
In terms of optimising your ads, let’s look at Promoted Products as an example:
There are five elements here that decide whether a user is going to click on your ad:
Amazon has fairly strict product image guidelines so make sure you have professional images to showcase your items. You have a lot more freedom with your product title and you want to optimise these to be descriptive, informative and compelling while including keywords wherever possible.
Review scores are crucially important across campaign performance (not only click-through rates) and there are two types of reviews you have to manage on Amazon:
Seller feedback is visible on your profile and product reviews are visible on the product pages and your ads. Product reviews have more weight in Amazon’s algorithms and a greater influence over CTRs as they’re visible on your ads.
You also have to make sure your items are competitively priced but it’s not always a case of the cheapest price winning the sale. Keep an eye on the price of competing products (organic and paid) while constantly looking at ways to differentiate your listing, especially if you’re trying to justify a higher price than some of your rivals.
Finally, the other visible item in Promoted Product Ads is the delivery information that estimates how quickly buyers could have the product in their hands. Listings show any delivery fees included or state that delivery is free and may also display a Get it as soon as line, including the earliest expected delivery date.
Naturally, free delivery and fast delivery estimates are a powerful weapon for increasing CTRs.
CPCs are a key metric for calculating the profitability of your Amazon Ads strategy. However, you should be careful about using CPCs as a KPI for campaign optimisation because you run the risk of limiting performance (and profit) by holding back on your bids when opportunities emerge.
That said, if certain campaigns or keywords have unreasonably high CPCs, it’s perfectly justifiable to take action.
One option is to pause the campaigns/keywords in questions to stop any further budget being used on them. However, you can actively lower CPCs by taking the following steps:
If you find Amazon CPCs are too high on campaigns using automated bidding strategies, there’s a good chance you’ll be able to improve your numbers by manually optimizing campaigns – although, it can take a lot of work.
Advertising Cost of Sale (ACoS) describes the ratio of advertising costs to revenue from advertising. So, for example, if you have an ACoS of 18%, you’re spending £18 to generate £100 from your Amazon advertising campaigns.
ACoS is calculated using the following formula:
ACoS = Advertising cost / Attributed sales
One of the great things about advertising on Amazon is that its closed infrastructure means you can attribute every sale with ease. Likewise, it’s easier to consider all of your advertising costs with fewer external variables, such as landing page design, losing time optimisation and other expenses that need to be considered with inbound advertising strategies like Google Ads.
From an optimisation point of view, ACoS is valuable because it allows you to measure the relationship between spend and revenue. So you can increase bids and see if there’s a comparative increase in sales to find the ideal balance of spend vs revenue.
In the last section, we warned against using CPCs as a KPI for optimising ad spend because you risk limiting performance. But, by using ACoS as your key performance indicator, you can optimise CPCs while keeping track of sales and revenue vs cost, allowing you to see where lower CPCs might be limiting performance and instances where higher CPCs are actually more profitable.
Optimising conversion rates in Amazon can be tricky because you have fewer opportunities to optimise performance and differentiate your offer compared to channels like Google Ads and Facebook Ads.
The good news is, Amazon boasts some of the best conversion rates in the business – the best, according to the Feedvisor study we linked to earlier.
That said, if your impressions and clicks aren’t generating enough conversions, there are some key steps you can follow:
By following these eight steps, you should improve the overall performance of your campaigns across all five of the KPIs we’ve looked at in this section but, ultimately, it all comes down to making sure users buy from you and not one of your competitors.
If you’re selling products online, then you should seriously consider advertising them on Amazon. This was true before the coronavirus pandemic but the outbreak has only reinforced Amazon’s position as the biggest online marketplace as more people turn to the internet for their shopping needs.
Platforms like Amazon and eBay are providing crucial channels for retailers that need to build an online presence fast but don’t necessarily have the resources to build their own online store.
When you consider the fact that more than half of all product searches take place on Amazon, you have to think this is a crucial channel for any retailer selling online.
Here’s a quick summary of the reasons you should consider Amazon in your PPC strategy.
Of course, if you want to maximise your online presence and sales across every channel, you should build advertising strategies across Amazon, Google Shopping and eBay Ads to cover the top three platforms for online purchases in the UK.
As things stand, Amazon could well be your top performer among these three platforms but Google isn’t far behind and it’s constantly working to make Google Shopping the top platform in digital retail. Meanwhile, eBay has built an impressively mature advertising platform in a very short space of time, compared to Google and Amazon.
In truth, it doesn’t really matter which of these platforms comes out on top at any given time because you want to be present on all three to maximise coverage.
As with any PPC strategy, it takes time to determine the right budget to maximise ROI. You have to understand the demand for your products, the competitiveness of the marketplace, seasonal trends and a range of other factors before you can calculate how much you should spend per conversion.As a minimum entry point, you would want to spend at least £50-£100 per day to gain any traction on Amazon Advertising but spending the minimum to get marginal results probably isn’t your goal.If you’re spending £100 per day with a return on ad spend (ROAS) of 350%, you’re generating £350 in revenue and £250 in profit per day. If you increase your daily budget to £1,000 (with the same ROAS and all else being equal), you’re generating £3,500 in revenue and £2,500 in profit per day.As with any PPC platform, optimised campaigns provide the opportunity to make more by spending more.
To manage a successful Amazon PPC strategy, you need a comprehensive approach to analysis and optimisation. On the analysis side of things, you need the following:– Audience research to understand the people most likely to buy your products.– Keyword analysis to show your ads to the most likely buyers.– Competitor analysis to find opportunities to overtake your rivals.– Trends analysis to find emerging opportunities in new trends – before everyone else.– Performance analysis to track the performance of ads and campaigns and maximise ongoing profitability.– Reporting to show you exactly what’s working, what isn’t and what to do next.On the optimisation front, you need to put in the following:– Amazon store optimisation to build your brand presence on Amazon’s marketplace.– Product listing optimisation to maximise clicks and conversions.– Placement optimisation to show the right ad formats in the most effective places.– Budget optimisation to find the ideal balance between spend and ROI.– Bidding strategies (and adjustments) to maximise the ROI on your investment.– Quality Score optimisation to lower the bid required to get results.– Advertising Cost of Sale (ACoS) optimisation to lower the cost of each sale through Amazon Ads.– Conversion optimisation to maximise the number of product purchases from your spend.– Amazon customer reviews to build your reputation and encourage more customers to buy from you.You can learn more about what it takes to run an effective Amazon PPC strategy on our Amazon Advertising page.
As we touched on above, Amazon offers some of the highest conversion rates among all PPC platforms. On average, Amazon advertisers see conversion rates of around 10%, compared to the industry average of 1.33% (Google Shopping campaigns average at 1.91%).This is important because it means you can expect an average of one in 10 clicks on your Amazon ads to generate revenue while you would normally expect 1-2 clicks in 100 to generate revenue from most platforms.This comes back to the fact that Amazon is a dedicated eCommerce platform where people go to find and buy products – nothing else. This user intent means people who click on your ads are in shopping mode and they’ve demonstrated an interest in your product by clicking through to see more information.
Amazon Advertising and Google Shopping are very similar in principle and Amazon boasts some impressive performance stats. Most product searches take place on Amazon and the network achieves a significantly higher average conversion rate for equivalent product types.When it comes to product listing ads, Amazon is the clear winner – but the big picture is more complex.Amazon is great for selling products on Amazon but Google Shopping campaigns bring traffic to your website. So, if you’re selling products on your own site, Google Shopping is still the most important channel for bringing visitors to your product pages. In this sense, it’s not really a question of Amazon vs Google, but how much budget you should be spending on each channel.
The comparison between Amazon and Facebook Ads is easier because the two platforms are so different. Amazon is a place for retailers to sell their products while Facebook is a social network that’s great for promoting brands and products through ads, but lacks any real system for selling products.This has changed somewhat with the launch of Instagram Shopping in the UK, which allows you to promote products on Instagram via Facebook’s advertising platform. Once again, though, the emphasis is on bringing visitors to product pages on your website, not purchasing products right now, in the app itself.
We are certified Amazon Advertising Partners so if you’re unsure how to add Amazon Ads into your PPC strategy or you’re struggling to find the right mix between Amazon, Google and eBay, speak to our retail advertising experts by calling us on 02392 830 281 or email [email protected]. You can also check out our Amazon advertising services here.
Callum is a PPC Specialist and joined Vertical Leap in early 2019. He believes the future of commerce and business will continue to innovate online and no other industry is as exciting or changes as much day by day. Already in his career Callum has worked closely with many of the UKs top institutions, from a range of industries and successfully managed large projects from inception and nurtured throughout. Callum holds a Biology Degree from the University of Exeter where he’s worked with many of the country’s leading ecology, developmental and marine biologists. Now he applies his analytical and scientific approach to the digital industry. Callum is also Swindon born, obsessed with running, Tottenham Hotspur and the world of craft beer.
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