PPC, CPC, CTR, SPA, SBA, ACoS – the acronyms used in Amazon advertising is not the only thing that is confusing when you dive into the science of paid ads. I guess science is the right term to use here as it sometimes feels like you need to be a rocket scientist to understand the possibilities and processes of managing ad campaigns.
So let’s start with the fundamentals.
What is Amazon PPC?
The acronym PPC stands for Pay-Per-Click and is a form of advertising based on a system where you pay for each click on your advertised offer. So if someone clicks on your sponsored ad, you pay for that click. If no one clicks on your ad, you don’t have to pay.
Click prices are different for each product and are determined by auctions per keyword. The seller who bids the most for a click is displayed at the top of the Amazon search results page.
There are three types of ads: Sponsored Product Ads, Sponsored Brand Ads (formerly known as Headline Search Ads), and Product Display Ads.
Sponsored Product Ads
Sponsored Product Ads (SPAs) are always labeled as “sponsored”. They are displayed to the customers in different locations throughout the site. Sponsored Product Ads are either displayed on the top, the middle, or the bottom of the search results page, or on competing listings.
Sponsored Brand Ads
Sponsored Brand Ads (SBAs) appear just below the search bar and above the normal search results. A Sponsored Brand Ad displays the sponsored brand’s logo, a custom headline, and up to three of the brand’s products.
Product Targeting Display Ads
The most popular placement of Product Display Ads is on product detail pages. There, the ads are displayed below the buy box as well as below the product attributes. In addition, Product Display Ads are placed in the left column as well as at the bottom and top of Amazon search results pages and can also be found next to customer reviews.
One major difference from Sponsored Product Ads and Sponsored Brand Ads is that Product Display Ads are not displayed based on search terms. Instead, Product Display Ads use interest-based targeting or targeting of specific products or product categories.
On Amazon, Product Display Ads are systematically played on other product detail pages. Therefore, when placing ads, you can designate the ASINs on whose product detail pages you want your ads to be displayed. This is not possible with SPAs and SBAs, as these are played out on the basis of keywords and not on the basis of interest targeting.
How Does Amazon PPC Work?
PPC is extremely complicated to fully understand and there are hundreds of guides out there that try to explain how it works. However, there is no “go-to” solution to running successful PPC campaigns, but at least a dozen different approaches. Nevertheless, all of them follow the basic principles of PPC.
Amazon PPC works on an auction system based on keywords and product ads. In order to appear on the search results page with a product ad, the seller or vendor bids a certain amount, for example $0.50, for each keyword they want to be displayed for. This is the maximum amount they are willing to pay for a click on their ad. Amazon then ranks the ads in the auction according to the bids and assigns the ad spaces. The seller or vendor with the highest bid usually has the best chance of reaching the top position.
The auction system works similar to Google’s Paid Ads system: The allocation of ad spaces is based on a secondary price auction, which means that the highest bidder only pays the amount that the secondary bidder has bid.
Why Should You Run PPC Ads?
Using Amazon PPC campaigns has several advantages. The biggest benefit is the increased visibility and awareness of your products, especially when launching a new product, as increased visibility usually leads to increased sales.
As more people buy your product, your organic ranking also improves and your listing appears higher up the search results pages earlier than it would without running ads. Pushing your organic ranking through sales using SPAs is also known as the halo effect.
It is advisable to use PPC not only during the launch phase of a product but also later on. You can use PPC campaigns to “protect” the ranking of an existing product or to promote short-term deals and special offers.
Just think about what happens if you don’t run PPC campaigns. If you don’t promote your products with paid ads, you give your competitors’ listings a big advantage as their products get more impressions and will rank better than your non-advertised product. You may save a few bucks, but you leave them with sales, reviews, and top rankings.
Who Can Use Amazon PPC?
Amazon PPC can be used by both third party sellers and first party vendors. However, what type of ad can be displayed depends on the type of seller as you can see in the image below.
First-party vendors can use all forms of advertising on Amazon. They can place Sponsored Product Ads, Sponsored Brand Ads and Product Display Ads to promote their products.
Third-party sellers have limited advertising options. Members of Amazon’s seller program can run Sponsored Product Ads, but Sponsored Brand Ads are only available to sellers who are brand-registered. Display ads are not available at all.
In the second price auction, the highest bidder wins the 1st advertising slot, but only pays the second highest bid.
Do You Need to Hire an Amazon PPC Agency?
Now that you know what Amazon PPC is and how the ad system works, you’re probably wondering if you can manage your PPC by yourself or if you should rather hire an Amazon PPC agency to set up and manage your ad campaigns.
It is possible to manage your campaigns yourself, but it is very time consuming and you still have other things to take care of in your business. An agency can take this work off your hands.
You can also benefit from the experience and knowledge of a professional Amazon PPC agency. While it might take you days to figure out why your ads aren’t performing, an agency will only need a quick look at your listings and campaign structures to see why. Instead of burning your money on poorly performing campaigns that don’t drive conversions, you can also invest it in hiring an agency.
Ultimately, it’s always a question of whether you have the budget and what other investments are necessary. There is no point in investing in an agency and having high converting ads if you don’t have the money to restock your inventory.
We generally advise all sellers of a certain size, who are no longer in the early stages of selling online, to gradually outsource things like PPC so that they can focus on other things such as product development.
Also, in case of expansion, always hire a local agency to manage your PPC campaigns, as it is important to have native speakers on board, especially for tasks where you need to know the language. Simply translating your keywords with Google translate is not going to work.
Last but not least, you will save money on expensive PPC management and analytics tools and minimize the risk of becoming a victim of click-fraud.
Conclusion – Leverage Amazon PPC to Get Your Sales Up and Improve Your Organic Ranking
In summary, Amazon PPC is a powerful tool to increase your sales and improve your ranking. Amazon PPC is an art form and if you want to manage your campaigns yourself you will need a lot of time, money, and perseverance.
Especially in the beginning, it can be frustrating not getting the results you want right away. However, if you have a little patience and confidence, you can take your business to the next level with the help of well managed PPC campaigns.
And, if you want to avoid wasting money on poorly converting PPC campaigns, you can always rely on the help of an Amazon PPC Agency. They can optimize your campaigns and teach you important key tips and tricks for running successful PPC campaigns.
In any case, always make sure that you have enough cash flow to restock your inventory before you start advertising.