Breakdown of Different Scenarios and Strategies to Evaluate Your Amazon Ads Potential
Did you know that over 200 million Amazon Prime members actively shop on the Amazon Marketplace? As one of the market leaders in e-commerce with a global customer footprint, Amazon has become an indispensable marketplace for buyers and sellers worldwide.
While this means a massive opportunity for Amazon sellers, it also means there is more competition to get products noticed on the Marketplace without a clear marketing strategy in place. Amazon Pay-Per-Click (PPC) advertising is a cornerstone strategy for brands aiming to thrive on the Marketplace, but is it actually worth it for Amazon sellers?
In this article, we’ll uncover the pros and cons of Amazon Advertising, compare it to other advertising platforms, dive into ad types and strategies, and offer tips for campaign optimization to help you elevate your brand presence and bottom-line growth. By the end, you’ll have a clearer understanding of whether Amazon PPC advertising is worth the investment for your brand.
The Benefits of Advertising on Amazon
Access to Massive Audiences
Amazon’s platform is home to millions of active shoppers around the world who frequently turn to the marketplace as the first destination when researching brands and products to buy. According to PowerReviews, up to 50% of all online shoppers in the US start their purchase journey directly on Amazon, as compared to only 31% on Google. These significant levels of high-intent customer traffic means that PPC ads on Amazon gives you direct access to motivated customers already in a buying mindset by placing your product at the top.
Significantly Higher Conversion Potential
With Amazon’s massive customer base with high-intent to purchase, your conversion potential is significantly higher. Amazon product listings can achieve conversion rates of 10–15% on average. Other direct-to-consumer e-commerce websites typically achieve significantly lower conversion rates between 1–2%. With Amazon PPC, your product listing is directly integrated into customer search results and increases your sales conversion. By also appearing alongside organic product placements, your listing often captures high click-through rates from customers seeking out specific items.
Advanced Targeting & Retargeting Capabilities
As a dominant market leader, Amazon’s targeting capabilities are built on a wealth of customer data from browsing history and purchasing behavior. As an Amazon seller, you can run ads that target relevant keyword searches, customer interests and so on.
With Sponsored Display ads, you can also retarget shoppers who have previously viewed your products, or similar products of competing sellers. This can also be useful for driving repeat purchases or for cross-selling complementary products.
With Sponsored Brands ads, you can drive traffic to your brand store or product listing with banner-style ads that are prominently placed at the top of customer search results. This provides a strategic opportunity to increase your brand awareness and showcase multiple products that help build strong brand recognition.
The Challenges of Advertising on Amazon
Increased Competition and Cost
Due to the growth and demand of the Amazon Marketplace, Amazon sellers can find themselves contending for customer attention with increased competition. This has driven an increase in the cost-per-click (CPC) on Amazon with the average CPC varying largely from one product category to the next depending on its popularity and commercial relevance of the target keyword (related blog post: Our Guide on Amazon PPC Keyword Research). The steady rise of competition may require brands to allocate more budget to achieve a positive return-on-investment, especially in competitive categories like electronics and health supplements. One critical step in optimizing Amazon ads is therefore bid management. As a leading Amazon Ads agency we have developed an Amazon PPC softwarethat leverages advanced algorithms to automate bids 24/7 to ensure that your bids are fully optimized to meet your ACoS Goals.
Ad Success May Require Significant Initial Investments in Learning and Optimization
The learning curve for Amazon PPC can be steep especially if you are new to Amazon advertising. As with most marketing strategies, testing and refining your campaigns is crucial to finding the right formula and success. This may require more investment upfront, including time, effort and budget, before seeing the positive returns on your investment. One advantage working with an Amazon advertising agency is that brands can leverage the experiences of the agency without having to “acquire” those same learnings by spending ad budget and wasting time (learn more about our Amazon PPC Services).
Types of Amazon Ads and Their Strategic Use Cases
Sponsored Product Ads
Sponsored Product ads showcase individual products directly in search results and on product detail pages that drive traffic to specific listings. This ad type is particularly effective and typically generates the best return on ad spend (more about our Amazon Sponsored Product Ad Management services). Most sellers start out with sponsored product ads, as they also do not require any creative assets. Ads drive traffic directly to product listing pages.
Sponsored Brand Ads
Sponsored Brands ads are banner-style ads that sit prominently at the top of search results, featuring your brand logo and multiple products. This ad type can help boost brand awareness while still generating a healthy ACoS (Advertising cost of sales). More about our Amazon Sponsored Brand Ad Management).
Sponsored Display Ads
Sponsored Display ads can be used to reach larger audiences pools (prospecting) or to retarget customers who have previously viewed your product listing and haven’t yet made a purchase. Performance can differ significantly, depending on whether you use it for prospecting or remarketing. Typically only larger sellers have remarketing audiences that are sufficient in size to use Sponsored Display ads in a cost-effective way (more about our Amazon Sponsored Display Ad Management services). Smaller Sellers simply do not have enough shoppers visiting their product pages to build up sizable remarketing audiences. Read our blog post on Amazon Retargeting Ads to learn how you can get the most out of your remarketing campaigns. Note that for display ads you also need to provide custom creatives (Related blog post: Amazon ad creative best practices with examples).
Differences Between Google, Meta, and Amazon Advertising
Google search ads are similar to Amazon Sponsored product ads: They target users who are already searching for something (i.e. a product) and have thus high intent. The difference between Google search and Amazon search is that on Google not all users are looking for products. While there are also users who are already in “buying-mode” when they search on Google, their share is overall lower compared to users on Amazon. Other popular Google ad types, such as Google Display Network Ads (GDN) or YouTube ads typically focus on users who are not yet in a purchasing mindset (display remarketing ads being an exception to that). They often target larger behavior and affinity based audiences.
Meta ads can reach users “full-funnel”, so across the entire purchase journey, but because Meta is not a search engine, the level of intent can never quite compare to a user typing a product related keyword into a search engine, or into the Amazon search bar. Meta’s strengths are its native ad experience and its unparalleled ability to harness first-party and third-party data to optimize ad efficiency.
Amazon ads really perform best in terms of reaching customers who are closer to the purchase stage of their journey. While it is possible to also reach potential customers earlier in the purchase journey using Amazon ads, building a brand can be difficult on the platform as the overall user experience is highly dominated by the Amazon platform and it is difficult for individual brands to really stand out and to create a well differentiated brand experience.
Amazon’s ad formats are thus more transactional, focusing on keywords, product categories, and behavioral retargeting.
Conversion Rates and Performance Vary by Platform
When it comes to conversion rates, Amazon PPC typically outperforms Google and Meta as shoppers on Amazon tend to have a higher purchase intent and are likely also existing Amazon customers, potentially with a Prime account. As mentioned above, on Amazon even conversion rates for non-Prime shoppers are typically between 10-15%. This is much higher than conversion rates on D2C ecommerce websites that are typically just 1-2%.
Thus while Google Search and also Google Shopping Ads can offer strong results the road to purchase from add-to-cart to payment on an ecommerce site is less seamless than it is on Amazon.
Meta ads can mostly only compete with Amazon and Google ads when it comes to remarketing: shoppers who have looked at a product detail page, or added a product to cart but have not yet completed their purchase can often be converted via remarketing ads that offer an additional incentive to complete their purchase.
Scenarios where Amazon Advertising Likely Benefits a Brand
High Intent to Purchase Product Categories
Niche-segments within popular categories such as electronic goods, beauty products, and home goods tend to attract higher conversion due to the higher demand and a clear product feature and benefit understanding. Amazon ads in these categories tend to see stronger performance due to higher customer intent to purchase and repeat buying.
New Product Launches – with Limitations
New product launches can be challenging without an existing customer base and lack of brand exposure. Amazon ads can help newly launched brands/products gain rapid traction by driving early sales velocity that are crucial for high organic ranking in search results. However, the caveat here is that new products by default do not have any reviews. This can be a significant barrier to purchase and it is thus important to pursue a holistic launch strategy instead of relying purely on ads.
In addition to that, the competitiveness of the target segment is also critical. Entering a “red ocean” market segment that is already overserved by hyper-competitive sellers will be difficult, even with significant ad spend.
Brands with Strong Organic Rankings
Brands with an already strong organic ranking can further amplify their visibility and boost sales by combining PPC advertising that can reinforce the brand’s credibility and help maintain market share in an increasingly competitive market.
Common Amazon Advertising Mistakes and Pitfalls to Avoid
Promoting Low-Margin Products
Lower margin products can struggle with profitability due to higher CPCs and advertising costs that can easily surpass profit margins if not managed strategically.
Targeting Highly Competitive Niches
In niche product categories where CPCs are high due to intense competition, sellers might see diminishing returns unless they refine their advertising strategy or invest more heavily into marketing.
Inconsistent Inventory Levels
Inconsistent inventory levels can disrupt the performance of ad campaigns. For example, if your products go out of stock while your ads continue to run, you will result in unsatisfied customers with wasted ad dollars and a negative brand perception.
The Positive Impact of Amazon Ads on Organic Rankings and Sales
One of the main reasons why we still believe that Amazon Ads are still worth it for most sellers is that Amazon PPC can also boost organic sales. This is because Amazon’s A9 ranking algorithm considers sales performance as a critical ranking factor. In simple terms: products that sell better also rank better! Increased sales velocity from Amazon ads can thus lead to improved organic search rankings. Other benefits are:
Brand Exposure
Amazon ads can boost your brand exposure in a competitive market, encourage more reviews and enhance trust among potential customers, which can indirectly influence organic rankings and sales.
Cross-Selling Opportunities
Amazon ads can lead to greater brand visibility while promoting related and other products from your store.
How to Get the most your of your Amazon Ad Campaigns
Targeted Keywords
Thorough keyword research is foundational to the success of your ad campaigns. Identifying high conversion relevant keywords that reflect your audience’s search intent and prioritizing them in your campaigns will boost the visibility and performance of your ads.
Efficient Budgeting and Bidding Strategies
Set realistic budgets to avoid over-expenditure and manage bids dynamically based on the performance of your campaigns. Do not make the mistake to follow Amazon’s suggested bid recommendations when setting bids and find a strong partner who can provide automated bid optimization. Get in touch with us if you want to learn how we can support you on this.
Campaign Monitoring and Adjustments
Monitor the performance of your campaigns regularly by assessing key metrics such as ACoS (Advertising Cost of Sales), conversion rates, and click-through rates. Use these insights to adjust your campaign strategy, including bids, budgets, and targeted keywords to improve your performance for best results.
Conclusion: With the Right Strategy, Amazon Ads are Definitely Worth the Investment for most Sellers
Although selling on Amazon can be competitive, the platform’s potential for high ROI remains unmatched compared with other platforms. By utilizing strategic Amazon ad types, brands can reach customers at various stages of their buying journey and drive significant brand visibility and product sales. With the right keyword targeting, bidding strategy, and campaign management, brands can maximize advertising returns and boost organic sales on Amazon.
