What is Amazon Advertising and Does It Work?
In short, yes if done correctly. Amazon’s advertising platform allows vendors to promote their products within product searches, product listings and more. An important thing to note here is vendors typically advertise rather than individual sellers. Why? Vendors have a greater incentive since they may be providing sellers with their products. The more products sellers sell, the more products the vendor sells.
Amazon’s AMS, which stands for Amazon Marketing Solutions, platform works on a PPC, or pay-per-click, and auction style system. Essentially the advertiser bids for advertising space on a per user bases and then pays according to the value of that click. This sounds difficult at first, but we’ll dive more into that later.
Within the advertising platform there are three types of advertising methods. Headlines searches, sponsored products, and product display. First, we’ll take a look at a headline search campaign.
Headline Search Campaign
With a headline search campaign, you have the ability place your product in the headline of searches that are relevant to your keywords. The image below shows where your ad may appear.
These headline searches allow you a few lines of text in addition to adding some images and links to individual products. In the image above, “Writing Performance That Exceeds Expectations – Shop Now” takes the viewer to a broad page showing all of the products the advertiser has decided to list. The other individual links, take the viewer to a product detail page.
As mentioned earlier this platform works on an auction style, PPC system. As complex as it sounds, it’s actually quite simple. We’ll use some hypothetical numbers to explain this. The auction system is the more complex of the two, as PPC basically means you pay a certain dollar amount every time a unique visitor clicks on your ad.
For example, if you expect a conversion rate of 2% and you have a $20 margin on each product sold, over the course of 100 clicks, you would expect to make $40. With this logic, the most you would value a click at is $.40 (40/100) to only break even. Thus, the very most you would price a click at is $.39.
With this amount in mind, you would set your bid to $.39 (or much less most likely) and then set your daily budget. Your daily budget is the maximum amount you’re willing to spend over the course of the campaign. So if you only want to spend $5 max per day over the course of a two-week campaign, you’d spend, at most, $70.
What determines how much you pay? Mainly the competition for the specified keyword. Amazon’s algorithms take every bid submission and then take the highest bid and drop it to $.01 higher than the next highest bid. Let’s take a look at the table below.
Bid Amount per Click
In the simplified example, there are four bidders on a specific keyword, John, Jeff, Angela, and Sydney. Sydney has the highest bid at $1.50, but she will not pay the full $1.50 for the click. Instead, she will pay $.01 higher than the next highest bidder. In this case, Jeff who bid $.99. Sydney will pay $1.00 for the click ($.99+$.01). Jeff, John, and Angela do not pay anything and do not receive any clicks.
Over the course of the campaign, new bidders may enter or leave the auction system, thus resulting in the amount you pay per click fluctuating. This is mainly because some campaigns will run out of their daily budget or run out of campaign budget, in which, the next highest bidder will win the auction.
For example, if Sydney had a daily budget of $20, and the keywords she chose were receiving a lot of traffic, she could run out of her daily budget if her ads were being clicked on. If the auction stays at $1.00 per click, after 20 clicks Sydney’s campaign will automatically end for the day, unless she adjusts her daily budget to higher than $20. This means the next highest bid will win the auction and that bidder’s ad will be displayed for the keyword. Following this scenario, Jeff will win the auction since he is the next in line, and will pay $.43 for the click.
With a sponsored product ad, you advertise a single product in the search results, on a product’s detail page, and alongside organic search results for a specific set of keywords. The sponsored product ad allows advertisers who have products with a low organic search position, or are new to the market a way of bringing their product into the first couple pages of the search results for their desired keyword.
The ad will appear almost identical to the organic search results, with the exception of a small label stating it is a sponsored product. These ads can appear just about anywhere in the search results page, including on the side where a vertical banner may appear. For example, in the screenshot below, the products in the blue box are sponsored products and appear at the bottom of the organic search results for the keyword, “computer monitors”. The products in the green box are organic search results.
Upon clicking on these ads, visitors are taken to the product detail page, just as they would be if the listing was in the organic search results. These ads work on the same auction and PPC style system as the headline search, so the bidding process is almost identical. The only difference is a sponsored product campaign can run indefinitely, with a set daily budget, while the headline search campaign has to be capped to a set amount or date that is a max of 6 months into the future.
In a product display campaign, these ads are placed directly on other products’ detail page that are relevant to your keywords, and in many cases your competitors. These ads are often presented right below the buy box. The screenshot below shows the buy box in the purple rectangle and the product display ad shown in the blue box.
With the product display campaign, this is the only area where the ad will appear. It may appear on multiple products under the same keywords, but it will only appear on this area of the page. Again, similar to the two other campaign options above, this ad works on the same auction, PPC style system.
Visitors who click on these ads will be taken to the product detail page of the product you are advertising. The product display is, in a sense, a last chance effort to divert customers away from your competitors or present a last impression before a purchase is made. Unfortunately, sellers do not have the option of deciding if this ad appears within their listings or not.
Overall, if you or your business is not participating in Amazon’s advertising platform, it should highly be considered. The platform is both robust and efficient for Amazon and advertisers. If you’re not sure how to get started, feel free to contact me and we can discuss some strategies that may be worth implementing into your business.
Speaking of strategies, if you’re interested in learning some basic strategies to use within Amazon’s advertising platform, check out this article:
For complete information on Amazon’s advertising options see this link: https://ams.amazon.com/faq