Amazon Advertising 101

July 5, 2023 Amazon Pay Per Click Advertising (PPC)

Learn the basics & set up for advertising on Amazon in 2020

As the competition grows on Amazon, it becomes increasingly important to utilize Amazon PPC campaigns to make sure you’re staying relevant amongst your competitors. However, if you’re new to selling on Amazon you may not be aware of how Amazon pay-per-click campaigns work and where to get started.

We’ve created this article to help dive a little bit into the world of Amazon pay per click advertising.

Amazon Seller Central currently has two different pay per click advertising types — Sponsored Products and Sponsored Brands. For the sake of this article, we’re only going to address Sponsored Product campaigns.

What is Amazon Pay Per Click Advertising (PPC)?

PPC is short for pay-per-click which is the type of advertising model that Amazon utilizes where you pay for each click you receive on your ad. While you may receive hundreds of impressions (people who see your ad in the search results), you’ll only pay when someone actually clicks on your ad to view your product. This is an auction style bidding system that is very similar to how Google Ads operates.

Amazon currently offers their third party sellers the option of utilizing several different types of PPC campaigns that all operate under the same,”pay to play” principle. Amazon allows you to create both “manual” campaigns in which you manually choose the keywords you’d like to bid on or competitor products you’d like to target, as well as “automatic” campaigns where you tell Amazon how much you’d like to bid per advertising click and then Amazon targets the keywords and ASINs they believe are most relevant to your product.

Automatic pay-per-click campaigns are just that — automatically operated by Amazon.

The way automatic campaigns work is that you tell Amazon what ASINs you’d like to advertise, and the maximum amount you’d like to bid for each click of your advertisement, and Amazon shows your ad on the search terms and products it believes are most relevant to the product you’re advertising.

Automatic campaigns are critical for keyword data mining as Amazon provides a report of customer search terms which you can then utilize in manual campaigns as well as for use in organic product listing optimization.

This is often a very effective way of advertising, especially when advertising a new product that you recently launched when you’re unsure of the best keywords you should be targeting.

Once you’ve gotten some conversions on your automatic campaigns, you can download a search term report to see which keywords people are using to land on your sponsored product ads and which of these search terms are converting the best, at the lowest cost per click.

Automatic campaigns allow you to find keywords to advertise on that you may not have thought of on your own.

Manual Campaigns

Creating a new manual campaign differs from creating a new automatic campaign that in addition to choosing the products that you’re advertising, you’re also choosing which keywords you want to bid on.

So what does it mean when you bid on keywords? Let’s say for example, you’re selling a facial sheet mask and you’re creating a new advertising campaign for them. Some examples of good keywords to bid on for this product may include phrases like:

  • Sheet Mask
  • Women’s Sheet Mask
  • Facial Sheet Mask
  • Moisturizing Face Mask

Once you choose what keywords you’d like to bid on for your campaigns, you have to choose your keyword match types.

Amazon allows for 3 different keyword match times:

Broad Match: A broad match keyword is when a search term contains your keywords in any order. For example if your keyword is “facial mask” and a search is made for “mask facial”, your ad would be served.

Phrase Match: A phrase match is when a search term includes your keyword, in the same order it’s written. For example, if your keyword is “facial mask” and a search is made for “women’s facial mask”, your ad will be served.

Exact Match: An exact match is when a search term is identical to your keyword. If your keyword is “facial mask” then the search term would have to be “facial mask” for your ad to be served.

Amazon Keywords

Keywords are one of the single most important aspects of Amazon pay-per-click advertising so it’s important to make sure you are targeting the right for your specific products.

What exactly are keywords? They are the words that people use to describe and search for your products on Amazon and elsewhere. These are the words that you add to your Amazon pay per click campaigns and bid on so that when someone searches for one of those words within Amazon, you ad will show at the top (given that you’ve bid high enough to beat the competition).

What is ACoS? on Amazon

ACoS stands for Advertising Cost of Sales which is a metric used by Amazon to determine the performance and efficiency of an advertising campaign. ACoS is measured by dividing ad spend by sales then multiplying by 100. For example, if your ad spend is $15 and your sales are $80, then your ACoS would be 19%.

15 ÷ 80 = 0.19 x 100 = 19%

While your goal ACoS will likely be influenced by your profit margins, the lower your ACoS, the higher your ROAS (Return on Ad Spend) so your goal should always be to maintain the lowest ACoS possible on your ads. Most sellers believe an ACoS of 20% or less is ideal.

When you first create a new campaign, you may sometimes want to allow your ACoS to be higher than longer term goals, in order to allow the campaigns to collect enough data to make decisions moving forward.

Amazon PPC Bidding & Budgets

There are two different levels of campaign budgets to be set on your Amazon account when creating your advertising.

The first is the campaign level budget which sets the maximum about you’re willing to spend daily across any and all ad groups within the same campaign. It’s not possible to create separate budgets for each ad group so if you want to have a specific budget for a specific ad group, that ad group should fall under its own campaign.

The second level of budget you can set for your PPC campaigns where you can set an overall daily budget which will cap the amount of money spent across your entire Amazon advertising account on a daily basis. You also have the option of choosing to use the campaign level budgets, without and overall daily account maximum.

Benefits of Running Amazon Campaigns

Unfortunately, with the competitive world of Amazon, organic sales are often just not enough to make it big on Amazon. The good news is that Amazon pay per click campaigns have an average conversion rate of 10% (whereas Google Ads — formerly known as AdWords — averages a 2% conversion rate). Customers typically go to Amazon to search for products they are either ready to buy or in the process of getting ready to buy which makes them much more likely to convert than other paid ads outside of Amazon.

It’s important to remember that if you aren’t advertising your products, your competitors will be advertising in your place and likely getting a larger percentage of the sales, even if you have a high-quality product and a solid organic listing.

Launching Your First Amazon PPC Campaign

If you’re an Amazon business that’s just starting out, you can get a free quote from AMZ PREP.  Not only do we assist with the entire back-office of Amazon, but we have an entire division dedicated to Amazon Advertising & PPC to drive sales on the marketplace. Let’s chat!

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Blair Forrest

Blair Forrest is the CMO of AMZ Prep. Blair helps provide consulting and guidance through our articles, guides, and other resources to help growing eCommerce & Amazon FBA businesses master their logistics and fulfillment.

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