The Best Amazon PPC Strategy for Your Advertisements

This is an article we co-wrote with our U.S. partner SellerMetrics. Some of the screenshots are therefore in English.

Managing your own Amazon PPC campaigns is hard work. Sellers often feel overwhelmed by the various types of ads and settings. Additionally, the other tasks of an Amazon FBA business add to the workload that sellers already have.

One of the biggest mistakes newcomers make is uncontrolled spending on their Amazon PPC campaigns. You can easily avoid this by developing a solid Amazon PPC strategy.

In this article, we will discuss bidding strategies before and during the active campaign.

Before you consult an Amazon PPC agency on the topic (for a lot of money), first read our article.

What is Amazon PPC?

“PPC” stands for “Pay per Click” at Amazon and other providers, referring to the billing model of the ads placed. Similar models exist with Google Ads, Meta, and others. The advertiser pays for each click generated by their ad.

The advantage is clear: Costs for Amazon PPC ads are incurred only when the ad actually converts. If no one clicks, it costs nothing. However, this means that the specific advertising expenses can only be estimated roughly in advance. However, the daily budget allows you to limit the maximum advertising costs of a campaign.

In most cases, and also on Amazon, PPC campaigns are typically keyword-based. This means that an ad is displayed when users search for the designated keyword (Keyword Targeting). Therefore, keyword research, which must be conducted in advance, is of particular importance. If the relevant search terms are not identified, it can potentially affect the success of entire ad groups and the campaign structure.

In the following example, both a sponsored Amazon Store and various Sponsored Products ads are displayed for the keyword “hiking pants men.” The latter are shown at the top before the organic search results, as well as further down the page.

Since multiple companies typically want to bid on a keyword, but the advertising spaces are limited, the Cost per Click (CPC) method is usually used to determine which advertiser receives the placement. The highest bidder accordingly gets the best position in the search results. The process also utilizes Real-Time Bidding, meaning that the ad placements are allocated and displayed in real-time. Therefore, the higher the budget per click, the more often Amazon will typically display the PPC ad.

As already mentioned, Amazon sellers can run various formats of PPC ads. These include Sponsored Products, Sponsored Brands, and Sponsored Display Ads:

In the following, we would like to discuss the individual formats and examine their purposes in more detail.

Sponsored Products

Among sellers and customers, Sponsored Products ads are the most well-known, although customers may not always recognize that these are ads on Amazon, as these listings have the same structure as organic search results and are only marked by the small gray text “Sponsored.” These ads can be created by regular marketplace sellers through Seller Central as well as by vendors through the Amazon Marketing Service. The generation occurs automatically based on the advertised product, including the links that lead to the respective product detail page. The costs for Sponsored Products ads depend on various variables, such as the CPC price, daily budget, and bids from other advertisers.

Although Sponsored Products ads or other PPC ads do not have a direct impact on a product’s ranking, they can indirectly improve the conversion rate and increase the revenue generated on Amazon, which in turn factors into the algorithm’s calculations. The relevance of product pages for specific keywords is crucial for the success of PPC ads, as the algorithm evaluates them based on various factors. Therefore, a successful PPC ad on Amazon requires proper SEO optimization of the advertised product detail page.

Product Targeting

Amazon also offers Product Targeting for Sponsored Products ads, where sellers can select other products, categories, or brands as the target for their ads instead of focusing on keywords. These ads are often placed on product pages and provide sellers with more opportunities to optimize and choose the best advertising placements for their target audience.

A less well-known option for promoting products on Amazon is landing pages, which allow for one or more products to be showcased on individual pages with special content such as videos or images. These can also be used for temporary brand pages linked to specific promotions or to generate leads. An example is the Kindle landing page on Amazon:

For this type of PPC ad, Amazon provides both templates and landing pages based on a modular system. However, to create a custom page, it is necessary to contact Amazon Advertising directly. For landing pages, Amazon has specific requirements and guidelines that sellers should definitely adhere to. All important information can be found here: Amazon Landing Page Guidelines.

Dynamic Ecommerce Ads

Another advertising option in the Amazon PPC universe is Dynamic Ecommerce Ads (DEA), which are based on Amazon’s extensive customer data. Similar to Product Targeting, products are targeted and advertised in real-time based on customer purchasing behavior. DEA uses the ASIN as a basis and requires a background image without a call-to-action button, as these are automatically added. GIFs and videos are not allowed, but coupons and customer reviews can be integrated.

The biggest advantage of DEA is their fully automated display; however, advertisers have limited influence as a result. They gain access to Amazon’s demographic data and an ad that dynamically adjusts to the collected data. Dynamic campaigns can also recognize changes in product status and respond accordingly, which saves time for advertisers.

Sponsored Brands

Another popular advertising format within Amazon PPC is Sponsored Brands, formerly known as Amazon Headline Search Ads. Unlike Sponsored Products ads, which focus on promoting a specific product, Sponsored Brands aim to increase the visibility of a particular brand. This means they target customers higher up in the marketing funnel, who use Amazon to discover new products and brands – 75% of online shoppers use Amazon in this way (The 2019 Amazon Consumer Shopping Study by CPC Strategy, p. 6).

To use this format, sellers must have their brand registered in the Amazon Brand Registry. More information can be found in our article on Amazon Sponsored Brands.

Sponsored Display

The last category we want to introduce is the Sponsored Display Ad within Amazon PPC. It combines Sponsored Products with display ads and is created based on existing product listings. Accordingly, they direct customers to a product detail page immediately after clicking.

The special feature: Sponsored Display Ads are purchased and created on Amazon and are only available to marketplace sellers, but they are also integrated on external websites and in third-party apps.

Uses of Display Ads

Sellers can use Amazon PPC advertising and Sponsored Display Ads to target both the upper and lower funnel: On one hand, they can specifically reach new customers, while on the other hand, they can encourage previous customers to make repeat purchases with related products. Classic retargeting is also possible with a Display Ad by showing customers products they have shown interest in in the past.

With a Sponsored Display Ad, Amazon customers can also be reached on other websites and directed to the advertiser’s product. This increases reach and not only aids in brand building outside the e-commerce platform but also enhances customer loyalty.

Typically, this advertising format is allocated by Amazon using the PPC method. However, brands also have the option to pay per impression, meaning per display.

Automatic vs. Manual Campaigns

Before we focus on your Amazon PPC strategy and bids, let’s first take a look at the differences between automatic and manual Amazon PPC campaigns. In automatic campaigns, Amazon automatically targets the keywords and similar products in your ads. However, in manual campaigns, this task is up to you:

Whether you should choose an automatic or manual campaign depends on which phase of the product launch cycle you are currently in.

The earlier you are in the cycle, the better automatic campaigns are suited for you. This allows you to experiment initially. In later phases, manual campaigns are more appropriate, as you already know which keywords and ASINs perform well with your product.

By the way: You don’t have to pause your automatic Amazon Advertising campaigns right away when your ASIN matures, but you should then shift more budget into manual campaigns.

Your Amazon PPC Strategy for Bids

Your campaign bidding strategy dictates how aggressive your bids can be. You have three options for this. Each represents a different level of aggressiveness.

Here are your options (sorted in descending order of aggressiveness):

#1: Dynamic Bid – Increase and Decrease

This bidding strategy is likely the most aggressive of the three options. With this, Amazon has the ability to adjust bids by up to 100% either upwards or downwards.

Let’s take an example: Your bid for a keyword is €2.00. In this case, Amazon can raise your bid to up to €4.00 if the likelihood of purchase is high. On the other hand, your bid can also be lowered to €0.00 if the chances are low.

Attention
Keep in mind that 100% is the maximum. In most cases, your bids will neither be raised to €4.00 nor lowered to €0.00, but rather your bid will be somewhere in between.

This strategy is suitable for you if you are willing to spend your entire Amazon PPC budget that you have set for this advertising campaign and if you are bidding on keywords that you feel confident about.

By the way, Dynamic Bids (Increase and Decrease) can only be used for Sponsored Product campaigns.

When you use Dynamic Bid, this can result in your bid and the CPC (cost per click) not being identical, as you have allowed Amazon to adjust your bids.

#2: Fixed Bid

As the name suggests, with this PPC strategy, Amazon will use the bid exactly at the amount (and any additional settings) that you specify. Your bids will not be adjusted based on the likelihood of purchase.

This strategy is suitable for you if you want to optimize your campaigns by constantly adjusting your bids. You know exactly what you are doing and do not want Amazon to influence your bids.

#3: Dynamic Bid – Only Decrease

This Amazon PPC strategy is the most passive option among the ones mentioned above. Here, the online giant can lower your bids by up to 100%.

Let’s take another example here: You bid €2.00 for a keyword. Now, Amazon can automatically lower your bid to €0.00 if the likelihood of a sale is very low.

This type of Amazon PPC optimization makes sense if you prefer to take a more conservative approach and want to avoid bidding on auctions that promise only a low likelihood of success.

By the way, this is the default setting for campaign bids in the Amazon PPC strategy for Sponsored Brand and Sponsored Display ads.

For campaigns that existed before the implementation of a campaign bidding strategy, Dynamic Bid (only decrease) is also the default option.

Your Amazon PPC strategy for campaign bids must align with your goals!

The different campaign bidding strategies target various strategic objectives. Therefore, before creating a campaign, it makes sense to consider which strategic goals should be achieved.

For all growth-based goals (e.g., more sales or a better ranking for a keyword), “Increase and Decrease” is suitable as an Amazon PPC Dynamic Bid strategy.

Fixed Bid or Dynamic Bid (only decrease) are suitable when you want to optimize your Amazon PPC campaigns.

Here are possible strategic goals for your Amazon PPC campaigns:

Ongoing Amazon PPC Bid Management

Once you receive the performance data for your active PPC campaigns on Amazon, you should adjust your bids accordingly.

As a rule of thumb, you should wait a full week before making any changes, as it is only after this time that you will have enough meaningful information to make informed decisions.

Additionally, it is advisable to wait more than just seven days for your very first Sponsored Product campaign before adjusting your bids. This way, you are on the safe side and have more data to rely on when optimizing your campaign.

As mentioned earlier, you should be aware of your strategic goals for your campaigns. These will also influence your target ACoS that you want to achieve with your campaign. Your target ACoS will impact the individual decisions regarding your bids.

What is ACoS?

Before we address the target ACoS, we should explain what ACoS actually is. ACoS stands for “Advertising Cost of Sale,” which is the ratio of your total advertising expenses to your total revenue. It shows you how much revenue you receive for every euro spent and can also indicate whether PPC on Amazon is worthwhile in your specific case. The costs are, of course, the decisive factor here.

As a rule of thumb: The lower the ACoS, the better the situation. This means you receive more sales in relation to your expenses.

If you spend €2.00 on a keyword and earn €10.00, your ACoS is (2/10)*100 = 20%.

How to Determine Your Target ACoS

Theoretically, your target ACoS can take on any value you set. To evaluate whether your target ACoS is good or needs improvement, you first need a benchmark. For this, you can use the “Breakeven ACoS.”

You can determine this by calculating your margins on a per-unit basis. You can use Amazon’s FBA Calculator for this. Based on that, you then calculate your profit margin as a percentage. This is your Breakeven ACoS.

In the example mentioned above, your Breakeven ACoS is therefore 67.11% or 84.38%.

In the final step, you determine how your target ACoS should relate to your Breakeven ACoS. For this, you should again consider your Amazon PPC strategy:

Armed with the target ACoS, you can now optimize your Amazon PPC bids based on your strategy. You can calculate your new bid using the following formula:

New Bid = (Target ACoS / ACoS) * CPC

CPC stands for Cost per Click, representing the click prices. We recommend using a time-based CPC. The timeframe should neither be too narrow nor too broad. At SellerMetrics, we use a range of 30 to 60 days for our CPC calculation.

If you want to adjust your bids, you can do this manually in the Amazon Advertising Console, use Amazon PPC Bulk Uploads, or utilize an Amazon PPC tool. The latter two options can save you a lot of time, especially if you want to make a larger number of changes (potentially across multiple Amazon PPC campaigns). Amazon PPC tools are particularly relevant for sellers who want to run complex campaigns that consist of various ad groups, keywords, and products.

Conclusion

You should take away two points from our article:

Amazon Advertising offers various advertising formats for online sellers with an Amazon business using the PPC model: Sponsored Products, Sponsored Brands, and Sponsored Displays. Sponsored Products direct customers to product detail pages to boost sales, while Sponsored Brands aim to increase brand awareness. Sponsored Display Ads can also be placed externally and utilize targeted advertising based on Amazon’s data treasure. Optimization is relatively straightforward.

The exact advertising costs are not predetermined, as all ads are allocated using the PPC model. However, by setting a daily budget, sellers can limit their costs. Amazon PPC ads are an essential component of any professional marketplace business and particularly complement the SEO strategy of private label sellers.

Additionally, it would be advisable to delve into the topic of bidding strategies, as this has far-reaching implications for your PPC campaigns. We know that Amazon FBA sellers are not exactly patient and want to try out new opportunities immediately. However, as explained earlier, it is important to have at least a direction in which the journey should go before embarking on it.

An Amazon PPC campaign is an advertising initiative where advertisers pay for the placement of their ads on Amazon. The abbreviation PPC stands for Pay-Per-Click, meaning that advertising costs are incurred only when the ad is actually clicked. These campaigns can utilize various ad formats such as Sponsored Products, Sponsored Brands, and Sponsored Displays to increase product visibility, boost sales, and promote brand awareness.

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Image credits in the order of the images: © onephoto – stock.adobe.com / Screenshot @ Amazon / © Prostock-studio – stock.adobe.com / © Screenshot @ Amazon / © Pixel-Shot – stock.adobe.com / Screenshot @ Amazon / © SELLERLOGIC / Screenshot @ Amazon