Updated March 2022
Amazon is the third largest advertising network on the planet next to Google and Facebook (Learn more about that news). By taking advantage of Amazon’s advertising tools, sellers can get their products in front of a huge audience on the largest shopping site in the world. To be direct – there is a potential to generate substantial revenue here! Since visitors are on Amazon to make a purchase, they are generally a more qualified audience. When managed correctly, Amazon Sellers can generate better returns here than on Google PPC or Facebook ads.
Here’s a general overview of Amazon’s advertising solutions.
Amazon Advertising Cost of Sales (ACoS): The Most Important Performance Metric
To calculate Amazon ACoS, take your total ad spend and divide it by your total ad sales; then display that as a percentage. If you spent $2,000 in advertising and made a total of $10,000, your ACoS would be 20%. Amazon’s window for attributing sales from a click that result in a conversion is 14 days. With other ad platforms you have more flexibility in controlling attribution settings. In the case of Amazon, they decide and you cannot change it.
ACoS is an important metric for a few reasons. To fine-tune and optimize your advertising strategies, you must reduce the amount of your ACoS as much as possible. Then align that with your product margin to ensure you understand your true cost and profit on the channel.
If your ACoS remains static, or at an acceptable level, as you scale your advertising spend, then you haven’t yet reached past your efficient spend or saturation level. Saturation is when you increasingly need to spend more money to get the same results.
Advertising with Amazon’s Marketing Products
While the Amazon Advertising platform is very young when compared to Facebook and Google, it is rapidly changing. We expect Amazon to continue to invest significantly to add new advertising formats and features. We also expect that with this investment will come more complexity and increased competition. Having a solid understanding of what works on Amazon now will mean driving profitable sales and being ready for whatever changes and increased competition will bring in the future.
For now we have summarized the most important advertising tools available through Seller Central. This is a summary of the available advertising formats, not a “how-to” on setting up an Amazon Sponsored Ad campaign.
Amazon Sponsored Ads
Amazon sponsored advertising shows up in-line with a consumer’s searches. When setting a sponsored product, sellers select the product, keyword phrases and choose a few other settings. For example, a consumer might look up “bagel toaster” and receive a listing of the most popular toasters on Amazon. In addition to the organic results that Amazon determines fit that keyword, are a “sponsored” results.
To the consumer, sponsored ads often appear virtually identical to organic listing. In fact, they can easily be mistaken for a typical listing. An Amazon Sponsored Ad will have a tag that reads “sponsored,” but this can easily be overlooked. Sponsored items also show up to the side of the Amazon listing for even greater levels of visibility.
Amazon Product Targeting Ads
Amazon Product Targeting ads are one of the newest available options on the Amazon advertising network. Unlike sponsored products advertising which is keyword based, product targeting makes it possible for you to show your ads specifically on pages for targeted products by letting you target categories, brands, or specific products that are most relevant. This can be a powerful way to target competitors or complementary products to pull customers into your product page who may not be familiar with your product or brand.
Amazon Headline Search Ads
Trademarked and brand registered sellers can run an Amazon headline ad. This appears above the query results for a given search giving it MORE visibility. With a lot of real estate available for the ad, the ad can impart more information than a traditional product ad. A headline search ad can be tailored based on the company’s marketing strategy. It can also be used to either show a single product or a selection of products from a store.
Headline search ads may highlight a store’s name, tagline, products, and other brand-related information. Much like a traditional banner ad, the benefit of an Amazon headline is that it’s one of the first and most prominent visual a consumer sees. Headline search ads build both brand and product awareness.
Amazon Product Display Ads
An Amazon Product Display Ad is a small ad that appears to the side of other product detail pages, with a target tailored by the algorithm to the product that is being viewed. Amazon’s primary interest is ensuring that customers get the product that they need and want. Its algorithms focus on making suggestions for other, similar products.
Amazon Product Display ads are meant to garner interest from consumers when they are looking at, or have shown interest in, similar products. The ad itself will show an Amazon product card. The card typically includes the name of the product, its reviews, and its star rating.
Advertising on Amazon is an important part of running a successful Amazon account. Like advertising on other networks, it’s important to:
- Create a plan
- Use all of the available advertising options
- Do a lot of testing and measuring of results
- Adjust strategies based on what you learn
Channeled is a full-service agency. We combine strategy and execution to deliver full channel management for multi-channel, direct-to-consumer brands that sell on Amazon and beyond.
From strategy to brand management and advertising to logistics, we are a trusted partner for scaling DTC brands. Contact us to learn more about our suite of services.
New to selling on Amazon? If so, check out this post written by Andrew, one of our Co-founders: Selling on Amazon…Getting Started.