Ads are an integral part of a Seller’s success on Amazon. Amazon ads are important because when a paid keyword converts to a sale for your listing, the search algorithm adds relevance and links that keyword to your product. The key to success lies in measuring your results and tracking them on a daily basis. In Chapter 9 of Amazon Jungle, and in this blog, I take a close look at the types of Amazon ads available to third-party sellers.
I have a love-hate relationship with Amazon Advertising. Amazon Sponsored Ads can really help drive traffic, sales, and search relevancy to products using targeted keywords. However, the ads are on a click-per-cost (CPC) basis and competitive bidding constantly drives up CPCs. In 2020, CPCs for high-volume keywords could reach as high as $17 per click.
Why are ads so important?
If you are not on the first or second page of Amazon Search Results, you simply will not get noticed. You won’t get clicks or sales. Amazon ads allow your product to rank higher in search results when shoppers search for products. The proper ad placement will help your product get seen and produce more sales. Since Amazon’s algorithm likes clicks and sales more than anything else, it rewards you with better placement.
When a paid keyword ad converts to a sale for your listing, the search algorithm adds relevance and links that keyword to your product. If you get enough sales driven by that keyword, then Amazon’s search ranking algorithm will not only give your ads better placement for less money, but it will also help your product rank in the organic search results. Organic rank is important because those clicks are free and the more organic sales a Seller gets, the more the Seller can afford to buy more ads, which doubles their presence on search results.
There are 4 different types of Amazon Advertising. It is Pay to Play on Amazon. The majority of the above-the-fold space comes from paid advertising. Paying to play is your best chance of getting seen and being seen is everything!
- Sponsored Brands – This type of ad was formerly known as Headline Search Ads. These take up the top section of all search results. A click on a Sponsored Brand Ad may take you to the brand’s Amazon Brand Store or to a listing page loaded with the brand’s products.
- Sponsored Ads – Often these ads take up the entire first row of search results. These ads can be set to display based on keywords, a competitor’s product, a product category, or a competitor’s brand name. So, if a Seller has deep pockets, they can literally block out their competitors’ ad space.
- Sponsored Display – These ads allow the Seller to serve banner ads on Amazon’s large inventory of display ads, both on and off Amazon. Display ads are powered by Amazon DSP and are sold on a cost-per-click basis. More recently you can drive traffic on a vCPM basis.
- Amazon DSP – Demand Side Platform is a programmatic way to reach audiences. The goal of DSP display placement is to drive brand awareness. Helping a brand gain “mind share” is the goal. DSP has a superpower – Amazon knows what you buy. It is Amazon’s ability to know what customers buy that makes this form of digital advertising so potent.
How Can You Measure Your Success?
Measuring success is important for tracking your progress. Regardless of the marketing you are doing, keeping an eye on the metrics and adjusting accordingly is an absolute must! I recommend tracking your metrics on the Campaign Manager in Seller Central. It offers many important metrics. Tracking them on a daily basis can mean the difference between success and bankruptcy.
Here are some basic tools to keep at the top of your daily checklist:
- Impressions – This is a pay-per-click metric that reveals how often your ad is appearing on Amazon. Impressions are important because, if they are consistently low, it signifies that the particular keyword you are using is not getting shown enough so it may be time to increase your bids. If sales still don’t improve, you may need a new keyword.
- Clicks – When an ad is served and a shopper sees it and “clicks” on your ad or product, you are that much closer to closing the sale. Clicks are good, but if you are paying for ads by-the-click then you want to make sure that a healthy number of these paid clicks convert to sales.
- Click-Through-Rate (CTR) – This is the ratio of shoppers who click on your ad or product compared to the number of shoppers who were served or who saw your ad or product. If your CTR on Amazon is low, that could mean that your image, price, reviews, or product title are not as attractive as your competitors.
- Cost-Per-Click (CPC) – This is the amount you pay for each click to your product. If you are paying a lot for clicks, and you get shoppers to click through to your product, you want to be sure those clicks convert to sales.
- Ad Spend – The total dollar amount spent on ads is your ad spend, which can get as high as $20,000 per month for just one product.
- Ad Cost of Sales (ACoS) – ACoS tells you what percentage of your ad sales is going towards the ad spend. I am not a huge fan of this metric because the attribution window for Sponsored Ads is only seven days, so a sale gets attributed to an ad or an ad sale within seven days of the first ad click. If a buyer clicks now, but comes back in eight days to buy the product, there is no way of knowing that the first click came from the ad.
- TACos – This is my favorite performance metric. It assesses the impact of advertising relative to Amazon sales. Your TACoS goal depends on the size of your profit margin.
At Avenue7Media we create automatic campaigns and ad groups in a way that casts a wide net in order to capture as many good, relevant keywords as possible. Remember that your Amazon listings are an investment. Sellers must continually listen to their customers and improve their products every time they buy more from their suppliers. Order metrics and customer service metrics must also be maintained. However, with the right product and a healthy margin, this split of Organic Sales to Ad Sales is sustainable and profitable. If done right, it will provide consistent sales growth and a TACoS that is small enough to maintain the overall growth and profitability of your business.
Build up your ad budget war chest prior to launch. Your amazon listings are an investment, and you can’t add them to your balance sheet until they gain relevance and rank. In this chapter and blog, we looked at four types of advertising available on Amazon. In Chapter 10, and the next blog, we will take a closer look at how to build your brand off Amazon with Rick Cesari. Rick Cesari co-wrote The Amazon Jungle The Truth About Amazon, The Seller’s Survival Guide for Thriving on the World’s Most Perilous E-Commerce Marketplace with me, Jason Boyce. Learn more here and grab some free resources.