What is Amazon PPC? How the Amazon PPC Auction Works

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.

Sponsored Product Ads

The most popular type of ad used by Amazon merchants are sponsored product ads.

Typically, these ads appear at the top of the organic search results page, in search results, and on the product listing page.

On Amazon search results:

On the product listing page:

You may see a small “sponsored” tag on products. These are all sponsored product ads.

This is the most common type of Amazon PPC ad, used by 70% of third-party sellers.

Benefits of using sponsored product ads

“Sponsored product advertising offers many benefits.”

• Sponsored product ads easily blend in with organic search and don’t interrupt the shopping experience.
• With proper keyword research, Sponsored Product ads can give instant visibility, drive sales for your newly launched product, and increase BSR rankings.

When creating Sponsored Product ads, sellers can use two types of targeting options.

• Automated targeting
• Manual targeting

Let’s find out what each is:

Automated targeting

Amazon uses automated targeting to decide which keywords to target based on the keywords in your listings. Amazon collects data from shoppers’ behaviour and adjusts bids over time to improve targeting and maximise conversions.

If you’ve just launched your product and don’t have any keywords to target, automated targeting is the best option.

However, it has some drawbacks. You have less control over your campaign as it relies on the Amazon A9 algorithm to find keywords. With automated targeting, you get more money at the expense of collecting relevant data.

Amazon has different targeting groups for automated campaigns:

• Close match: Your product ad appears when a shopper searches for closely related search terms. For example, if you sell running shoes, customers who search for “running shoes” on Amazon will see your ad.
• Loose match: Your product ad appears when a shopper searches for keywords related to your product. For example, for a running shoe product, your ads may also appear for the search term “athletic gear.”
• Alternative: Your product ad appears when a shopper searches for a similar product from another brand. For example, if you’re selling running shoes and the shopper searches for “Nike shoes,” your product may be shown to them.
• Complementary: Your product ad appears on a complementary product listing page. For example, your product ad may appear on a product detail page for socks.

Manual targeting

The manual targeting option gives you more control over your ad campaigns. You can choose keywords from automated campaigns or find high-volume, relevant keywords to target with the SellerApp keyword research tool. You can also set custom bids on each keyword.

Manual targeting can be divided into keyword and product targeting. We will discuss these in more detail later in this article.

Sponsored brand ads

Sponsored brand ads, formally known as “Headline Search Ads,” are advanced Amazon ads available only to brand-registered sellers and vendors.

These ads help businesses build brand awareness and increase sales by displaying products with creative ads in relevant Amazon shopping results.

These ads typically appear at the top, side, and bottom of Amazon search results and include the brand’s logo, tagline, and some of the brand’s products.

Benefits of Sponsored Brand Ads

Here are some of the benefits of sponsored brand ads:

• Sponsored brand ads can generate better ROAS by driving shoppers directly to a brand storefront or a custom landing page with zero competition.
• It also allows sellers to promote complementary products and encourage shoppers to add more items to their cart. With sponsored brand ads, sellers can choose from three types of formats.

1. Product Collection
2. Store Spotlight
3. Video

Product Collection

You can advertise up to three products using the product collection ad format. A dedicated landing page that shows only the three products in your ad or your own, uniquely branded Amazon shopfront are other options you can direct traffic to. If you want to drive traffic to products you want more visibility and conversions for, this is a great option.

Store Spotlight

This ad type is great for brands that sell a variety of products across multiple categories or subcategories. Instead of promoting multiple products, sellers can promote all three product categories in their Store Spotlight ads.

In the above example, the brand showcases three different product categories in a single ad instead of promoting three separate products. When you click on any of the categories, it takes you to the Amazon storefront subcategory page.

Sponsored Brand Video Ads

Amazon-sponsored brand ads also include videos.

Since videos stand out more than images, video ads can significantly increase a brand’s visibility over its competitors.

However, before creating a video ad, make sure you read the Amazon Sponsored Brand Video Ad Guidelines.

Here are some best practices for creating Amazon Sponsored Brand Video Ads:

• The length of the video should be between 15 and 30 seconds.
• The video should be informative without any unnecessary content.
• The videos play automatically, without sound. So make sure you add informative text and captions.
• Avoid using unnecessary introductions at the beginning of the video. Show your product directly at the beginning.

Sponsored Display Ads

Sponsored display ads allow sellers to connect with buyers throughout the shopping journey and increase conversions.

These ads can appear anywhere, such as on Amazon affiliate sites, mobile phone apps, Netflix, Facebook, and even Google.

Note: Amazon has recently launched video creatives for sponsored display ads. With these, you can get buyers excited about your products on and off Amazon with engaging visuals.

Benefits of Sponsored Display Ads

Sponsored display ads are one of the best ways to reconnect with potential customers and convince them to buy your product.

• It uses shopping signals to target high-intent audiences on and off Amazon and engage new customers.
• It targets buyers outside of Amazon and brings them back to your listings.
• It improves sales of high-value products with long sales cycles.

Sponsored Display Ad Targeting Options

With sponsored display ads, you cannot target keywords. But sponsored display ads can target specific buyers based on their purchasing behaviour.

For example, if a buyer has viewed a product on Amazon before, it will show those products repeatedly in different locations to the same buyers so that they return to the product listing page and make a purchase.

There are two strategies available for targeting product display ads.

• Contextual targeting
• Amazon audience

Contextual targeting

With contextual targeting, sellers can show ads to shoppers who have viewed a particular product or product category. Ads appear on Amazon search results pages, product detail pages, Facebook, Twitch, and third-party websites.

Audience targeting

You can use audience targeting to select the exact buyer audience you want to show sponsored display ads to.

You can choose from three types of audience-targeting strategies.

View Remarketing

With View Remarketing, sellers can retarget audiences who have viewed their product listings or listings of similar products and categories but have not made a purchase within a specific lookback window. You can choose from different lookback window options, ranging from 7 days to 90 days.

Visual remarketing helps merchants re-engage with shoppers to move customers into the consideration stage, build awareness during new product releases, and convert missed sales.

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.

1. In-market: This strategy allows sellers to target audiences who have recently purchased products in a given category.
2. Lifestyle: It targets audiences that show different types of purchase and viewing behaviours, including shopping on Amazon, video streaming, browsing on IMDB, etc.
3. Interests: This strategy allows sellers to increase awareness of their products among potential buyers based on their frequent browsing and purchase history.
4. 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.

1. 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.
2. 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.
3. Fixed bid: Here, Amazon does not change your bids. Your bids will remain the same unless you manually change them.
4. 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.

1. Go to Measurement & Reporting → Sponsored Ads Reports
2. Click “Create Report.”
3. Select the report category: “Sponsored Products.”
4. Report type: “Search terms.”
5. Time unit: “Summary.”
6. Report period: “Last 30 days.”
7. Name your campaign.
8. Give me your email address and schedule now.
9. Press the Run report button.
10. 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.

1. Reduce bids for exact match keywords with an ACoS greater than the break-even ACoS.
2. Bids should be paused or reduced for terms that generate a lot of clicks but few sales.
3. Include high-ACoS search terms in your negative targeting keyword list.
4. Add search terms with good sales and low ACoS as exact match keywords.
5. 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

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.