Amazon PPC: An Introduction to Advertising on Amazon

You down with PPC? Yeah you know me...

“If you build it, he will come” - Everyone knows the the iconic line from Field of Dreams, the movie where Ray Kinsella, played by Kevin Costner, builds a baseball diamond in a cornfield. Once Ray finishes building the diamond, ghosts of baseball lore emerge from the cornfields and occupy the diamond as Ray goes through a journey of self discovery and reflection. It’s a touching movie and a great way to spend 2 hours with your kids, but i’m guessing that aren’t here for my movie recaps.

Unlike Ray, just because we launched a listing on Amazon, that doesn’t mean that customers will come. In this post, we are going to review your options on how to start advertising on Amazon.

PPC on Amazon

PPC, or pay-per-click advertising is the easiest and most straight forward method of advertising on Amazon. While strong organic rankings and key to driving long-term success on the platform, advertising through PPC is generally considered to be table stakes, especially for competitive categories. Within the Amazon, the PPC world is referred to as ‘Sponsored Ads’ which makes sense are you are quite literally sponsoring an ad to be featured someone on the platform. Sponsored Ads is then further refined and segmented in Sponsored Products, Sponsored Brand, and Sponsored Display.

---

Sponsored Products, an Introduction to Advertising

Sponsored Products are the individual product ads that you see across Amazon search results and product detail pages. This format is where almost all sellers compete for traffic, and where most sellers spend the bulk of their advertising budget.

Targeting for sponsored product falls into three separate buckets…

• Keyword Targeting: This is exactly what it sounds like. Brands and sellers identify a list of keywords that they believe customers will associate with their listing, and pay Amazon a fee each time their listing is clicked. Keyword targeted campaigns primarily show on search results pages and the ads are interspersed at top and throughout the the rest of the results. An example of this in action is listed below.

  Note: Notice how the organic results are increasingly hard to find? This is why it is critical that you pair a strong PPC strategy with your SEO….Amazon is continuing to find new ways to make the platform ‘pay-to-play’ and organic sales are on the decline.

• Product and Category Targeting: Product (aka ASIN) and category targeting is where an advertisers targets specific items or categories rather than a keyword. This targeting mechanism provides advertisers with the ability to identify items base don their taxonomic category (also know as the Item Type Keyword (ITK) classification) or by selecting individual ASINs. The most common execution for product targeting is called conquesting. Simply put, contesting is the act of directly advertising against a specific competitor….Do you have a better price, more reviews or higher star ratings? Do you have a more compelling PDP that will drive a better conversion? If yes — product targeting can be a winning format for you. Even better news - product targeting ads are generally much less expensive than keyword targeted ads. Here is an example of where product targeted ads show in the wild.

• Automatic Targeting: Auto targeting is where you let Amazon’s machine learning dictate where and when you ad will show. This is a mix of keyword, product and category targeting which is a gold mine for keyword research to help identify what does and doesn’t work or you business.

If you are going to be a successful Amazon seller, you need to master Sponsored Products as this is non-negotiable for success. Remember - unlike in Google, paid performance does impact organic rankings so if you are able to execute a successful PPC strategy you will see benefits benefits in your organic rankings as well.

---

Sponsored Brand, a Love Story

Sponsored Brand ad units were originally developed as a way to appease brand marketers. The initial goal of Sponsored Brand was to help brands get more content into the shopping experience and have their ad units stand out from the competitive jungle that is sponsored product. There are two primarily ad units across three placements. The classic Sponsored Brand ad unit (aka Sponsored Brand Headline) is shown at the top of a search results page with a three product carousel including a brand logo and tagline…the other SB placement occurs at the bottom of a search results page as a stand alone brand logo.

A key differentiator for the ad format and an attribute that makes it unique, is the fact that you can drive traffic to your Brand Store. You brand store is effectively your Home Page on Amazon, and is a great vehicle to drive exposure for a portfolio of product. Here is an example of a top-of-search Sponsored Brand placement.

This this top of search placement typically trades at a 30% premium to your Sponsored Products cost per click. This means that if you were willing to bid $10 to will the first spot within sponsored products, you would typically need at least a $13 bid to secure the sponsored brand placement. Why is this unit so expensive? Classic supply and demand based economics. There are only two sponsored brand placements on the page and sellers will fight it out to secure this prime real estate.

The other Sponsored Brand placement is Sponsored Brand Video (SBV). If Sponsored Brand is the homely cheerleader, SBV is the prom queen. There is only one opportunity to win the Sponsored Brand Video ad unit and tremendous competition for the real estate. One (obvious) challenge for smaller brands is the development of a SBV video asset. We’ll cover inexpensive ways to develop content in another post, but you can use animation rather than full production and UGC is your friend. Better news - Amazon might make a video for you….if your spend warrants their investment. Enough with my banter - here is an example of the ad unit.

Now let’s talk targeting. The good news is that the targeting mechanism for Sponsored Brand is generally the same as Sponsored Products (no automatic targeting available). Why is this great news? This means that you can take the best best performing keywords, categories and ASINs to from your your Sponsored Products campaigns and use them to build your Sponsored Brand campaigns. This will save you tremendous time, energy and money by avoiding inefficient spend.

Unfortunately, Sponsored Brand is not for everyone. In fact, only brands that have enrolled in Amazon’s Brand Registry are eligible for the placement. This is bad news for resellers and arbitragers as regardless of what they are willing to pay, they will not be able to use the ad unit.

---

Sponsored Display,

Sponsored Display is Amazon’s self-service PPC-baed display advertising offering. SD enables advertisers to run display marketing campaigns without having to use Amazon’s Demand Side Platform (DSP) which is how banners ads are typically managed and served across the internet.

Display campaigns are generally put into two overarching segments: retention and acquisition. Retention campaigns typically focus on retargeting and re-marketing to past purchasers of your product and previous visitors to your product detail pages and brand store (if applicable). These campaigns are generally measured through an efficacy metric, most commonly ROAS (return of ad spend) or CPP (cost per purchase) — both of these metrics help to measure how efficiently you are managing your spend. Acquisition focused campaigns are built to find new audiences that you believe have a high probability of being interested into our brand or product. Acquisition focused campaigns are generally NOT focused on purchase efficiency. Since the goal of a prospecting campaign is to generate interest and traffic, the most common metric to measure performance is Cost Per Detail Page View (cDPV), which is a measurement of how efficiently you drove traffic to your Amazon listings. While this sounds counter intuitive, the average Amazon customer engages with more than 7 branded touchpoint before making a purchase, so you need to remind customers that your items are available and relevant for their needs.

Curious on how advertiser can target customers through Sponsored Display? I got you — within the retargeting and remarketing category advertisers are able to target past visitors and those who look like (look-a-likes) past visitors. Additionally, Sponsored Display offers ‘audience targeting’ which empowers advertisers to choose which audiences see their ad. I.e. if you are selling wireless headphones you might want to target an audience of ‘avid runners’ as they seem like a high relevant and restive audience for your product. Think that the targeting options might be too complex? They aren’t — here is a snap shot of the self-service tool which walks you through each step of the process.

Unlike Sponsored Products or Sponsored Brand, Sponsored Display ad units are found in a number of places. They can show up below the “Add to Cart” button on product detail pages, next to and below search results, or on third-party websites and apps depending on your preferences. Here is an example:

How Does the PPC Auction Work?

Now I would be remiss if I didn’t touch on how Amazon decides which ads to show. Without doing a deep dive into PPC (that will be an upcoming paid post), Amazon’s PPC business works on a what is called a second-price auction system. In this model, all advertisers submit a maximum bid (the most they are willing to pay for each click of their ad.

The highest bidder wins the auction for the top position, also known as ad rank #1, and although the bidder may have bid significantly more than the advertiser in position #2, they will only pay $0.01 more than the second-highest amount. There are other factors to play into the auction including relevancy (think Google Quality Score) campaign history and review velocity, but at it’s core - PPC is a bid-driven format and the higher bid typically wins the auction. Below is a simple chart to help you better understand the process. In this instance, Advertiser number 3 has the highest bid, but only pays $0.01 than advertiser 1, and well below their max bid.

What’s Next?

At this point you should be familiar with the major ad formats that are available to you to drive traffic and sales and have enough confidence to get started with a small budget to learn through experience. Need a little more info — sign up for the paid subscription and get ready for a deep dive on PPC Strategy and Optimization Tactics.