Amazon Pay-Per-Click (PPC) advertising has developed into a powerful marketing channel on Amazon. Running Amazon PPC ads enables sellers and vendors to ‘buy’ visibility for their products at the top of Amazon’s search results page. However, the number of sellers leveraging Amazon PPC potential continues to grow significantly year over year. So, if you don’t have a defined PPC strategy in place, it may become difficult to achieve your advertising goals on Amazon.
In this guide to Amazon PPC, you will learn about the different Amazon ad formats available for sellers and vendors, the basic building blocks of Amazon PPC, and how to create and optimize your first PPC campaign.
What is Amazon PPC?
Amazon PPC is an advertising model in which advertisers pay a fee to Amazon when a shopper clicks on their ad (pay-per-click). There are 3 formats available: Sponsored Products, Sponsored Brands and Product Display Ads (PDAs)
- Product Display Ads – ads that send shoppers to Amazon product detail pages. PDAs are available for vendors only and use product or interest targeting to deliver relevant ads to shoppers with certain interests, or to shoppers who are actively viewing specific products. Amazon vendors can learn more about using PDAs here.
- Sponsored Products – keyword-targeted ads that enable advertisers to promote individual products
- Sponsored Brands – ads that allow brands to promote a custom headline, brand logo, and up to 3 products in their ad, with the ability to send shoppers to their Stores page or a custom landing page on Amazon.
Where do Amazon PPC ads appear?
Sponsored Product ads appear in two locations on Amazon: the search results page and on Amazon product detail pages. Your Sponsored Product ads can also appear on external websites using the Sponsored Products ‘Extended Ad Network Beta’, and retarget visitors (off Amazon) who viewed your product detail pages but did not make a purchase.
Sponsored Brand ads are displayed in the Amazon search results page. There are four ad placements available for Sponsored Brands; one placement displayed above the fold (‘Top of Search’), and three placements below the fold in search results. Read our beginner’s guide to Amazon Sponsored Brands to learn more about using this ad format.
Product Display Ads typically appear below the “Add to Cart” button on Amazon product detail pages, and can also appear on the right rail of search results, at the bottom of search results.
Who can use Amazon PPC ads?
Amazon vendors (1P) have access to Sponsored Products, Sponsored Brands, and Product Display Ads in their Amazon Advertising Console. Amazon sellers (3P) are required to have a professional selling plan to use Sponsored Products. Only sellers with Brand Registry are eligible to use Sponsored Brands.
If you’re already selling on Amazon – you can request a free report that grades your advertising performance.
How much does Amazon PPC cost?
How does the PPC auction work?
The Cost-Per-Click (CPC) on Amazon will always depend on the highest bidder: each advertiser submits a default bid (the maximum they are willing to pay) for their ad. The highest bidder wins the highest ad position (ad rank #1) and will also pay the highest CPC but only $0.01 more than the next highest bid.
In the above example, Advertiser 3 wins the auction with a bid of $4.00. If their ad is clicked, the cost of the click charged to Advertiser 3 will be $3.51.
What is the Average Cost Per Click (CPC)?
On Amazon.com, the average CPC typically range from $0.02- $3, and your average CPC can also vary greatly depending on the Amazon product category or subcategory you sell in, and how competitive your niche is.
Does Amazon PPC improve my organic rankings?
Yes, it can. Unlike in Google Adwords, Amazon PPC sales have a direct influence on a product’s organic ranking on Amazon. Therefore, more sales generated via Amazon PPC ads will have a positive effect on a product’s organic ranking.
This effect is especially important for new products. New products generally lack a sales history, and therefore performance data, which in turn negatively affects organic ranking. Amazon PPC can change that by driving traffic to the product listing and thereby boosting sales.
The Basics of Amazon PPC (things to know before you start)
In order to run successful Amazon PPC ads, you need to familiarize yourself with the basic building blocks of Amazon PPC. Below we’ve summarized the key concepts and terminology advertisers should familiarize themselves with when starting out with Amazon Sponsored Ads:
- Targeting (Keyword, Product (ASIN), Category): When you setup your Amazon PPC campaign, you can choose to target your ads based on keywords, product ASINs, or product categories on Amazon.
- Search terms v.s. Keywords: ‘Search terms’ refers to any search query the customer types into Amazon. ‘Keywords’ refer to what you, as the seller, bid on in your ad campaigns. Depending on the keyword match type used, one keyword can cover multiple customer search terms.
- Keyword Match Types: Keyword Match Types determine the degree of match between the keyword and customer search term in order for an ad to appear on Amazon. There are 3 match types available (Broad, Phrase, Exact), all with varying degrees of ad targeting precision & monitoring effort required.
- Negative Targeting: Negative keywords are used to help sellers exclude unwanted customer search terms from their ad campaigns. When utilized effectively, negative targeting can be a very powerful tool to help you control your advertising costs on Amazon.
- Campaign types: The main difference between running an automatic & manual campaign is that a manual campaign will give you more accurate results. In an automatic campaign, you let Amazon run your ads for you, and your ad will be automatically matched to all the search terms Amazon deem relevant to your product. In a manual campaign, you choose the keywords you wish your ad to be displayed for, giving you greater ad targeting precision.
- Dynamic Bidding: Advertisers can choose to set fixed bids or use Amazon’s dynamic bidding options (‘bid down’, bid ‘up and down’), which allows Amazon to adjust your bids in real-time based on the conversion probability.
- Adjust Bids by Placement: Advertisers can use this feature to modify bids to target Top of Search and Product Detail Pages. A bid modifier from 0% to 900% can be applied for targeted placements.
How does Keyword Targeting for Amazon PPC ads work?
Amazon PPC ads uses keyword targeting to match a shopper’s search query with the relevant Sponsored Products or Sponsored Brand ads.
Within a manual campaign, advertisers can further refine their ad targeting using the three keyword match types are available:
- Broad match type: search terms that contain all components of your keyword in any order.
- Phrase match type: search terms that contain all components of your keyword in the same order.
- Exact match type: search terms that match your keyword word by word (same word order + same components)
How to set goals for your Amazon PPC campaign
Advertisers running Amazon PPC ads will already know that it can be very easy to incur a loss on your product with Sponsored Ads if you’re not tracking the performance of your campaigns against your PPC costs.
In order to evaluate the performance of your Amazon PPC campaigns, you need to be clear about your goals for running Amazon ads from the outset. Below we’ve summarized the goals and the target values you will need to calculate according to your campaign goal:
How much should I spend on Amazon PPC?
To understand how much you should spend on Amazon PPC, you need to first calculate your profit margin before ad spend, aka your ‘break-even ACoS’. Regardless of the goal of your campaign, you will always need to calculate your product margin first to determine how much margin you can afford to spend on Amazon PPC, before you start to incur a loss on your product.
How do I calculate my break-even ACoS?
Your break-even ACoS (‘Advertising Cost of Sale’) is your profit margin before ad spend. In the example below you can see that your profit margin before ad spend is 35%. With a breakeven ACoS of 35%, this means as long as you don’t spend over 35% on PPC to promote your product, you won’t lose money.
If your campaign goal is to maximise sales, by calculating your break-even ACoS, you will always know the maximum you can afford to spend on PPC to breakeven for your product.
Tip: Your break-even ACoS is calculated automatically for all your campaigns, ad groups, and keywords in our PPC Manager (for sellers) and AMS Manager (for vendors.) Immediately pinpoint the campaigns, ad groups, or keywords that are unprofitable and losing you money.
How do I calculate my target ACoS?
If your goal is to run a profitable campaign, you can use your break-even ACoS to determine a realistic target net profit margin for your product.
For example, if you decide you want a 5% profit margin after advertising costs, and you have a break-even ACoS of 20%, this means you have 15% to spend on PPC. This is your target ACoS. To ensure you run a profitable campaign in line with your target profit margin, you will never want to spend over your target ACoS.
Tip: We’ve made it easy for you to upload your Target ACoS for all your Amazon PPC ads in Sellics, so you can always see if you’re on track to hit your Target ACoS.
How do I calculate my total net profit?
If your goal is to maximize total profit for a product, you will need to calculate your net profit after deducting advertising costs. This cannot be viewed in the Sponsored Products Campaign Manager, and you will need to manually calculate this yourself (unless you use Sellics) using the below formula:
Tip: Your net profit is automatically displayed in our PPC/AMS Manager. Sellics automatically deducts all your costs (Amazon fees, FBA fees, Cost of Goods, and shipping costs), and displays your net profit after ad spend for all your campaigns and ad groups.
Optimize your Amazon Listing before you start with Amazon PPC
Before you start with Amazon PPC, it’s important to ensure your Amazon product listings are optimized for Amazon SEO. Amazon SEO is a prerequisite for keyword targeting and optimizing the Click-Through-Rate (‘CTR’) & conversion rate (‘CR’) of your Amazon PPC ads.
Amazon SEO is a two-step process:
- Keyword Optimization: Including all relevant keywords for which the product should be found in the product listing text. Having a keyword in your listing ensures your ad is shown for this particular keyword and can generate impressions.
- Listing / Content Optimization: Including high quality and relevant pictures, engaging copy, etc, to improve both your organic and advertising CTR and CR.
How to create and optimize your Amazon PPC campaign
In general, we recommend advertisers to combine an Automatic campaign and a Manual campaign for the same product or set of products. If you’re compiling a set of products, make sure that the products selected have similar keywords and product margins.
The goal is to use your Automatic campaign for keyword research purposes and regularly transfer the high performing search terms to your Manual campaign, where they can be further optimized. This process is called ‘PPC campaign optimization’, and we will show you step-by-step how to optimize your PPC campaigns further below.
Creating your Amazon PPC campaign
Creating an Automatic campaign is easy. All you need to do is name your campaign (or ad group) and define a budget and a CPC bid. As soon as your campaign kicks off, Amazon examines the advertised products and automatically starts displaying your ads for selected search terms. You can export these search terms as a .csv file in Seller Central or conduct an easy, in-depth analysis of them using Sellics.
Create a Manual campaign to add your own choice of keywords. An excellent resource to research these keywords is Sonar, our free Amazon keyword research tool. For a decent basic coverage, research the top 20-30 keywords and add them to the match type “Broad.”
The following table summarizes all the details you need to create an Amazon PPC campaign:
Optimizing your Amazon PPC campaign
Regular campaign optimization is the key to success with Amazon PPC. You’ll only want to make adjustments to your PPC campaigns once you have collected a sufficient amount of data (impressions, clicks, conversions, etc) to evaluate your current campaign performance.
We recommend to wait a minimum of 2 weeks before you make any changes to your campaign, and once you have collected enough data, you can regularly perform our top three recommended optimization measures we’ve listed below:
1. Transfer keywords from Automatic to Manual campaign
You should regularly transfer your top-converting search terms from your Automatic campaign to your Manual campaign.
This process is simplified for you in Sellics. Simply click on the ‘auto’ campaign in your PPC Manager, and you will instantly see all the new customer search terms Amazon has matched to your ad.
Of course, not all search terms matched by Amazon will be relevant to your product. You will only want to add the search terms that have generated purchase orders (i.e. sales) for your ad.
Use our Smart Filters to filter for the profitable search terms that have generated orders, and move them to your Manual campaign, where you can optimize them further and have more control over the keyword CPC.
2. Use Negative Keywords (remove unprofitable search terms)
You will want to periodically track the search terms running in your Automatic campaign and Manual campaign that are generating clicks without conversions, to prevent accumulating unnecessary PPC costs. You can learn more about negative keywords here.
When filtering out unprofitable search terms from your Amazon PPC campaigns and ad groups, your aim is to remove:
- Irrelevant search terms that are clearly not relevant to your product.
- Unprofitable search terms that may be relevant to your product, however, continue to only generate clicks without conversion.
When utilized correctly, negative keywords will help you achieve a lower ACoS. Use our PPC Analyzer to track whether your optimization efforts were successful, and immediately see if you’ve succeeded in lowering your ACoS.
3. Optimize CPC bids for Your Amazon PPC Ads
In order to find the ‘optimal CPC’ for your campaigns, ad groups, and keywords, you will need to define your campaign goal (whether your aim is to maximize sales/impressions, maximize total profit, or achieve your target ACoS) and calculate the relevant key metrics. You can read our CPC optimization guide for further guidance.
Once you have defined your goal and targets you can test different CPCs to see which one brings you the closest to your target. Below are some standard rules for adjusting and optimizing your CPC bids:
- Keywords with poor ACoS: Lower keyword bid if keyword ACoS > Target value
- Keywords with good ACoS: Increase keyword bid if keyword ACoS < Target value
- Keywords without conversions: Reduce keyword bid or pause keyword
- Keywords with few or no impressions: In case of no impressions, check if the keyword is missing in your product listing. In case of low impressions try increasing the keyword bid.
Keep in mind it’s critical to allow for sufficient waiting time between keyword bid changes, to ensure you have collected enough data (impressions, clicks, conversions, etc) to help you assess whether further bid adjustments are necessary.
Use our PPC Analyzer to track the effects of your CPC bid changes on your sales and advertising costs, and immediately see if your optimization efforts have succeeded in increasing your PPC sales, or lowering your ACoS.
Maximize your Amazon Advertising success with Sellics
The Sellics PPC Manager for sellers and AMS Manager for vendors dramatically simplifies the management and optimization of Amazon PPC campaigns. Use our PPC features to maximize your advertising revenue and optimize your ACoS.
- PPC Automation: Save time and automate your keyword bids. Focus on campaign profitability and get the most out of your Amazon advertising spend.
- Day Parting/Ad Scheduling: Get full control over when your ads are switched on/off on Amazon. Save money and turn off your ads for specific time slots where you know sales probabilities are low.
- Net Profit Display: We calculate the net profit for all your Amazon products and ads (we automatically deduct your Amazon fees, taxes, Cost of Goods, shipping, and PPC costs).
- No More Spreadsheets: Use our Smart Filters to quickly filter through high and low performing keywords. Change your campaign status, keywords, bids, and budgets directly in Sellics.
- Historical Data Tracking: Track your campaign performance for any given period, and use our Trend Chart to analyze the performance of your ads.
- See Your Bid History: Immediately see the positive or negative effect of your bid changes on your ACoS, impressions, CTR, and conversion rate.