What is Amazon PPC? How the Amazon PPC Auction Works

31 July 202427 July 2024 by omniscienceblog.com

Fact: 79% of brands say PPC is the primary motivating factor for their business.

With over 300 million buyers actively browsing Amazon, ready to buy, there is no better platform to advertise your product than Amazon.

If you are selling on Amazon, you must have heard about Amazon PPC advertising.

It is the most powerful and cost-effective way to get your products in front of customers and increase sales.

If you are new, you must be wondering what Amazon PPC is and how it works.

Don’t worry!

In this detailed guide, we will cover all the basics of PPC and guide you on how to properly set up your first PPC campaign so that you don’t waste your ad budget.

So, let’s get started.

What is Amazon PPC?

Amazon PPC is an advertising model that helps sellers and brands increase their product sales online. Sellers can run advertising campaigns for their products. And every time a potential customer clicks on the ad, Amazon charges the seller a small fee.

How Does Amazon PPC Work?

Before we dive into Amazon PPC in detail, it’s important to understand how it works as well as important PPC terminology and features.

Here’s a top-level summary of how Amazon PPC works:

Buyers search for “water bottle” on Amazon.
Amazon collects all relevant ads for the keyword “water bottle.”
When sellers place bids on keywords, the highest bidder wins the auction.
Amazon displays the winning sponsored product ad at the top of search results and product detail pages.
When a buyer clicks on the ad, the seller has to pay Amazon a small fee.

Why is PPC important for Amazon sellers?

Now that you understand Amazon ads, let’s understand why they’re important for your Amazon business.

As of May 2022, Amazon had 2.4 billion organic traffic.

As more and more consumers shift their shopping activities online, e-commerce giants like Amazon and its sellers have immense opportunities to grow their revenue. However, the growth potential also brings with it visibility issues.

Since Amazon is a retail platform, users visiting it are actively looking to make a purchase.
But if they don’t find your product on the first page, 45% of shoppers say they won’t bother scrolling through the rest of the pages.

Amazon PPC ads help sellers bring their product to the top of the search results page, which might otherwise be buried in a sea of competitors.

This leads to more sales and, in turn, improves the product’s organic ranking on Amazon for each well-performing keyword.

Amazon PPC: Key Terms and Features

Here are some of the main Amazon advertising metrics you should track:

ACoS: This metric measures the effectiveness of an Amazon PPC campaign. It is the ratio of advertising revenue to expenses. For example, if you spent $5 on advertising and generated $20 in sales, your ACoS would be 25%.

Impressions: Ad impressions are the total number of times potential customers see your PPC ad, whether or not they click on it.
Clicks: This is the number of times buyers clicked on your ad.
Click-through rate (CTR): Click-through rate (CTR) is the ratio of clicks and impressions for an ad. For example. If your ad gets 100 impressions and only one buyer clicks on it, your CTR will be (1/100)*100 = 1%.

Attributed Sales: This is the total amount of sales that your ad generates from clicks on your ad in a given time period. Sales data can take up to 48 days to appear in reports.

Amazon PPC Ad Types

When creating your first PPC campaign, you’ll see three ad types that Amazon offers.

Sponsored Products
Sponsored Brand
Sponsored Display

The purpose of each type of ad depends on your objectives.

Purchase Remarketing

With purchase remarketing, sellers can show display ads to audiences based on their purchase behaviour in a specific window.

Purchase remarketing allows businesses to connect with audiences that have previously purchased comparable products, re-engage old customers, and increase brand loyalty.

Compared to view targeting, purchase remarketing has a longer lookback window, ranging from 7 days to 365 days.

Amazon Audiences

Amazon Audiences helps sellers reach new potential buyers by targeting thousands of pre-built audience segments.

There are 4 different audience techniques available to sellers.

In-market: This strategy allows sellers to target audiences who have recently purchased products in a given category.
Lifestyle: It targets audiences that show different types of purchase and viewing behaviours, including shopping on Amazon, video streaming, browsing on IMDB, etc.
Interests: This strategy allows sellers to increase awareness of their products among potential buyers based on their frequent browsing and purchase history.
Life Events: This allows sellers to show relevant products to audiences based on their recent life events.

Sponsored display ads on Amazon are a relatively new type of PPC advertising. However, as a seller, you should know all three types of PPC campaigns to target customers at different stages of the marketing funnel.

However, since sponsored product ads are the most popular among sellers in general, in the next section, we will discuss how to set up a sponsored product ad campaign from start to finish.

Amazon offers a few other types of advertising, such as Amazon DSP and OTT advertising.

Amazon DSP

Amazon DSP is a demand-side platform (DSP) offered by Amazon. It allows advertisers to programmatically bid and buy ad space on various websites and apps through a unified platform.

You can provide a powerful shopping experience to your buyers with Amazon DSP.

Amazon OTT

Amazon OTT (over-the-top) ads let you reach buyers through video on Amazon’s website, mobile apps, and Fire tablet wake screens.

These ads allow brands to effectively communicate their stories and provide an engaging experience to customers.

How to create automated, targeted product ads

Step 1: Create a campaign. Visit Amazon Seller Central and go to Ads > Campaign Manager.

Here, click “Create Portfolio.” Give the portfolio a name.
Using a portfolio, you can combine multiple campaigns under one heading. You can create portfolios with any name according to product categories, brands, ad strategies, or your goals.

You can also add budget caps to your portfolios to ensure you stay within the budget for a specific portfolio.

Next, scroll down to the bottom of the graph and click “Create Campaign.”

You will be redirected to the “Choose your Campaign Type” page, choose Sponsored Products, and click “Continue.”.
On the next page, start filling in all the details.

Step 2: Name the campaign. This can be anything, but we recommend using a specific naming convention to help you remember the strategy behind creating the campaign.

Naming convention:

Campaign Type: Targeting; Product Name: Attributes

Example:

SP_Auto_Water_Bottle_CM_LM
SP_Manual_KW_Exact_Water_Bottle

Step 3: Set the start and end dates. Next, choose the start and end dates of your campaign. If you want your campaign to run indefinitely, you can leave the end date blank.

Step 4: Set the budget. Now, set the maximum amount you want to spend on ads per day as the daily budget.

Note: For most categories, set a daily budget of $50 or more when starting a new campaign. If you choose a daily budget of $10, it will run out quickly, and you won’t get enough data from the campaign.

Step 5: Create ad groups. In the next section, create ad groups. Ad groups help you organise different product ads and track their performance within a campaign. Products grouped together in an ad group share the same bids and targeting.

Choose an ad group name that’s the same as the campaign name.

Step 6: Choose products: Next, choose the product you want to target. When getting started, we recommend adding one product to each ad group.

Step 7: Choose a targeting strategy. Automatic and manual targeting are the two available targeting strategies.

Tip: When you’re launching your ad campaigns, we recommend starting with automatic targeting.

Step 8: Choose a bidding strategy

The bid is the amount you are willing to pay for someone to click on your ad. However, in most cases, you won’t spend the full bid amount. It will be slightly more than the second-highest bidder.

Let’s say you targeted the keyword “water bottles for camping” and set the bid to $10. And the second-highest bidder set the bid to $5.50. Since your bid is higher, you will win, but you will have to pay around $5.51–$5.75 for each click on your ad, which is slightly more than the second-highest bidder.

There are 3 different types of bidding strategies available to you.

Dynamic bid-down only: If Amazon thinks your ad is less likely to convert into a sale, it automatically lowers your bid. This will prevent your ad from appearing in product searches that aren’t relevant.
Dynamic bid up and down: If your ad is more likely to convert into a sale, Amazon may increase your keyword bids by up to 100% for the top of search results and up to 50% for all other product placements. Similarly, if the ad is less likely to convert, it automatically lowers your bids.
Fixed bid: Here, Amazon does not change your bids. Your bids will remain the same unless you manually change them.
Rules-based bidding: Amazon also has a rules-based bidding strategy for sponsored product ads. Here, you can set a target ROAS. Next, Amazon modifies your base offer for each impression to reach the desired ROAS.

If the target ROAS is not met within 21 days of applying a rule-based bidding strategy, Amazon immediately reverts to the previous bidding strategy.

We recommend setting a ROAS higher than your current campaign’s ROAS. For example, if your current ROAS is 3, set the rule-based ROAS to 3.5 or higher to get the most results.

Step 9: Set your bids

You can set your bids to automatically target Sponsored Product ads in two ways.

1. Set a default bid

Amazon offers a default bid of $0.75, but we recommend starting at $2 – $3 to ensure an easy win in bids.

2. Set bids by targeting group

If you want advanced options, you can set bids for different targeting groups. Amazon offers four targeting groups:

Close match
Loose match
Alternative
Supplemental

You can set different bids for each group depending on your needs.

Step 10: Choose negative keywords

If you don’t want your ads to show on Amazon for some irrelevant keywords or phrases, you can add them as negative keywords.

For example, if you launch an automated campaign for whey protein product but don’t want your ads to show for “high protein milk powder,” adding it as a negative keyword would be helpful.

However, we recommend leaving it blank when launching your first campaign to reach more customers and collect more data. Both are equally important for a newly launched product.

Step 11: Start the campaign

Once you have completed all the information, double-check to confirm. Once you are satisfied, click the “Start Campaign” button below.

It usually takes 30 minutes to an hour for your ad to show on Amazon.

How to optimize auto-targeting Sponsored Products ads

We recommend running auto-targeting ads for at least two weeks before making any changes.

Once the campaign has run for two weeks, go back to your Campaign Manager in your ad account and select the Campaign > Ad Group you want to monitor.

Here, you can see a detailed summary of your campaign, including your total spend, ad sales, total impressions, ROAS, and ACoS.

Create a search term report

After reviewing the broad-level data, you can create a search term report to perform a deeper analysis of the automated campaign.

This provides information to help you understand which search terms are performing well and which are not. You can optimise automated and manual campaigns with this data to reduce ACoS and increase sales.

Go to Measurement & Reporting → Sponsored Ads Reports
Click “Create Report.”
Select the report category: “Sponsored Products.”
Report type: “Search terms.”
Time unit: “Summary.”
Report period: “Last 30 days.”
Name your campaign.
Give me your email address and schedule now.
Press the Run report button.
After a while, you can download your ad report from the “Sponsored Ads Report” dashboard.

Search Terms Report Review

In the search terms report, we’ll focus on the following three metrics:

Customer search terms: These are the exact phrases Amazon shoppers use to find your product
Total advertising cost of sales (ACoS): This is the percentage ratio of ad costs to total sales.
7-day conversion rate: This is the ratio of the number of clicks on the ad to the number of sales in the same time frame from the keyword.

Find low-performing keywords

First, calculate the break-even ACoS for your product to understand which keywords you’re losing money on.

Your break-even ACoS is where your cost of selling the product plus your advertising cost equals the profit margin. An ACoS higher than the break-even point means you’re losing money.

Next, filter the Search Terms report to find low-performing keywords.

For example, find keywords with 10+ clicks but an ACoS higher than the break-even ACoS or a low conversion rate.

When you find low-performing search terms, add them to a negative-targeting list in your automated campaign.

Find high-performing keywords

Use the same Search Terms report to identify high-performing keywords. For example, filter these high-performing keywords to identify keywords with at least 10+ clicks.

Create manual campaigns targeted at the high-performing keywords on your shortlist.

Also, add these high-performing keywords to the negative targeting list under the automated campaign.

You don’t want to waste your ad spend by targeting the same keywords in automated and manual campaigns.

Sounds tedious?

Get all these ad insights at your fingertips using the SellerApp Ads dashboard.

Go to SellerApp Dashboard > Advertising Tools > Insights. Here, find all the positive and negative search terms and ASINs from your campaigns based on your targeted ACoS.

The best part?

Take actions directly based on search terms and optimise your campaigns. It also gives you the ability to check the history of your actions to make necessary changes when needed.

How to Create Manual-Targeting Sponsored Product Ads

Now that you have some data to start with, start creating manual ad campaigns for your product. But first, you should perform keyword research to find relevant, high-performing, and high-volume keywords.

Step 1: Keyword Research

Use the SellerApp Keyword Tool to find relevant, high-volume, high-converting keywords for your ad campaigns.

Step 2: Create Ad Campaigns

Go back to your Campaign Manager and repeat the same process to create your automated campaigns up to Step 6.

In this case, choose manual targeting instead of automatic targeting.

Step 3: Set up targeting

Manual targeting also includes two different types of targeting strategies.

1. Keyword targeting: With this strategy, you can bid on relevant keywords to get top positions on Amazon search results.

2. Product targeting: Use this strategy to bid on ASINs of similar brands or competitors to get your ads displayed on relevant product detail pages.

There are three types of match types for keyword targeting:

1. Broad match:
With broad-match keyword targeting, ads can appear for all search terms and closely related variants and synonyms of keywords. For example, if you target the keyword “shoes” with a broad match, your ad might also appear for the search terms “footwear” and even “sneakers.”

To help refine the broad match feature, Amazon introduced the broad match modifier in Sponsor Brands and later Sponsored Products ads.

This gives advertisers the ability to guarantee that specific keywords will appear in search terms at all times.

For example, targeting “+sport +shoes” in a broad match will ensure that both “sport” and “shoes” are included in all search terms. However, targeting “sport shoes” in a broad match may also trigger an ad for search terms like “rock climbing shoes” or “sneakers.”

In short, broad-match keyword targeting is a great way to extend the reach of your Amazon PPC campaign, but the broad-match modifier gives advertisers more control over the search terms that trigger their ads.

2. Phrase matching:
With phrase matching, your ads appear for search terms that are exactly the same as the phrase or have additional words before or after the phrase. For example, if you target the keyword “coffee mug” with a phrase match, your ad might appear for search terms like “coffee mug,” “red coffee mug,” or “coffee mugs for hiking.”

3. Exact match:
When you choose an exact match, search phrases that exactly match the keyword appear in your ad. For example, if you use exact match targeting for the keyword “coffee mug,” your ad might only appear for the phrases “coffee mug” or “coffee mugs.”

Let’s create a manual keyword-targeting campaign using the steps in this article.

Step 4: Add keywords to targets

On the “Enter a List” tab, add relevant keywords you generated using the SellerApp keyword research tool.

Step 5: Adjust bids

After adding keywords, adjust the bids on the keywords as you wish.

When getting started, we recommend adjusting your bids 30–40% higher than Amazon’s suggested bids to get more visibility and initial sales. You can also fine-tune bids based on impressions, sales, and ACoS data from automated campaigns.

Step 6: Add negative keywords

Use the Search Terms report to add low-performing keywords from automated campaigns to the negative keyword targeting list, so you can save money.

Step 7: Start the campaign

Double-check all the information and click the “Start Campaign” button to start the campaign.

It can take anywhere from 30 minutes to an hour for the ad to go live on Amazon.

How to target Sponsored Product ads manually

Optimising manual campaigns is different from automated campaigns.

Step 1: Once you filter out high-performing keywords from the automated campaigns, add those keywords as exact match keywords to your manual campaign because you know these keywords have performed well. This is called keyword-harvesting.

Step 2: Download the search terms report after two weeks of running the manual campaign.

Step 3: Calculate your break-even ACoS. Let’s say your break-even ACoS is 30%; therefore, you don’t want to spend more money than that.

Step 4: Sort keywords in descending order based on ACoS. The goal is to reduce spending on low-performing keywords and increase spending on high-performing keywords.

Step 5: Go through each keyword in your campaign and adjust bids accordingly.

Reduce bids for exact match keywords with an ACoS greater than the break-even ACoS.
Bids should be paused or reduced for terms that generate a lot of clicks but few sales.
Include high-ACoS search terms in your negative targeting keyword list.
Add search terms with good sales and low ACoS as exact match keywords.
Raise bids on keywords with low impressions but high conversions.

Monitor your campaign periodically and repeat the process based on your business goals.

Conclusion

In conclusion, mastering Amazon PPC is essential for any seller looking to enhance their visibility and sales on Amazon. With the right strategies and continuous optimisation, Amazon PPC can significantly boost your product’s exposure, drive targeted traffic, and ultimately increase your revenue. It’s crucial to monitor your campaigns, analyse performance metrics, and adjust your bids and keywords to stay competitive. Remember, Amazon PPC is not a set-and-forget tool; it requires ongoing management and fine-tuning to achieve the best results. By leveraging Amazon PPC effectively, you can stay ahead of the competition and maximise your potential for success in the marketplace.

FAQ

Q1: What is Amazon PPC?

Amazon PPC (Pay-Per-Click) is an advertising model where sellers pay a fee each time a shopper clicks on their ad. These ads are designed to increase product visibility on Amazon’s search results and product pages.

Q2: How does Amazon PPC work?

A: Amazon PPC works by allowing sellers to bid on keywords relevant to their products. When shoppers search for those keywords, the ads appear in the search results or on product pages. The seller is charged only when a shopper clicks on the ad.

Q3: Why is Amazon PPC important for sellers?

A: Amazon PPC is important because it helps increase product visibility, drive targeted traffic, and boost sales. It allows sellers to compete effectively in a crowded marketplace by reaching potential customers who are actively searching for their products.

Q4: How can I optimise my Amazon PPC campaigns?

A: To optimise Amazon PPC campaigns, you should focus on selecting the right keywords, setting appropriate bids, and continuously monitoring and adjusting your campaigns based on performance metrics. Utilising negative keywords and refining your ad copy can also enhance your campaign effectiveness.

Q5: What are the different types of Amazon PPC ads?

A: The main types of Amazon PPC ads are Sponsored Products, Sponsored Brands, and Sponsored Display ads. Sponsored Products ads promote individual product listings, Sponsored Brands ads highlight a brand and its products, and Sponsored Display ads target audiences both on and off Amazon.

Q6: How do I measure the success of my Amazon PPC campaigns?

A: The success of Amazon PPC campaigns can be measured using various performance metrics, such as Click-Through Rate (CTR), Conversion Rate, Advertising Cost of Sales (ACoS), and Return on Advertising Spend (RoAS). Analysing these metrics allows you to gauge the effectiveness of your campaigns and make informed decisions based on the data.

Q7: How much should I budget for Amazon PPC?

A: The budget for Amazon PPC varies depending on your goals, competition, and product category. It’s recommended to start with a modest budget, monitor your campaigns’ performance, and adjust your spending based on results and profitability.

Q8: Can Amazon PPC help new sellers?

Yes, Amazon PPC can be particularly beneficial for new sellers as it helps increase product visibility and generate initial sales. By strategically targeting relevant keywords and optimising campaigns, new sellers can build momentum and establish their presence on Amazon.

Q9: What are negative keywords in Amazon PPC?

Negative keywords are terms that prevent your ads from showing up in irrelevant or unprofitable searches. Adding negative keywords to your Amazon PPC campaigns can help improve your ad targeting and reduce wasted ad spend.

Q10: How often should I review my Amazon PPC campaigns?

A: Regularly reviewing your Amazon PPC campaigns is crucial for success. It’s recommended to analyse your campaigns at least once a week to make necessary adjustments, optimise performance, and ensure you are achieving your advertising goals.

Final Thoughts

We hope this Amazon PPC guide made it easier for you to understand the different types of Amazon ads and set up a PPC campaign.

Do you need some help creating successful PPC campaigns? Take a look at SellerApp PPC-managed services.

Our team of dedicated experts has helped 20,000+ brands like yours create and manage PPC campaigns worth $1.8 billion. And we can do the same for you!

If you have further questions about Amazon PPC, schedule a call with us, and our experts will get in touch with you and clarify your doubts.