With more than 197 million active monthly users, and a logistics network shipping to more than 100 countries, Amazon is the largest market in the modern ecommerce arena by far.
However, with so much potential acting as a magnet for ecommerce brands of all stripes, Amazon is also extremely competitive. Ensuring your brand is a success isn’t as simple as uploading some listings and waiting for the sales volume to roll in.
To really unlock the potential of Amazon as a channel, you’ll need a comprehensive strategy that includes a well-thought-out approach to Amazon advertising.
In this guide, we’ll take a closer look at how Amazon advertising works, the variables involved, and how you can optimise your advertising campaigns to maximise success for your listings.
Amazon advertising works using the same basic model as any other pay-per-click (PPC) advertising platform: you place bids on high-demand keywords that are relevant to your product, then pay Amazon for every click those ads earn, whether they result in a purchase or not.
For most of the history of Amazon advertising, paid ads used to be controlled through two separate portals for sellers and vendors. However, in 2020, Amazon consolidated their Amazon Advertising Platform (AAP) and Amazon Marketing Services (AMS) into a single Amazon Advertising platform accessible from both kinds of accounts.
Though Seller and Vendor Central still have different capabilities tied to each account type, either one can now access the same types of campaigns, ad systems, and reporting formats.
The Amazon advertising platform is accessible to any seller or vendor with brand registry, and the most popular types of ad format on the platform include Sponsored Display, Sponsored Products, and Sponsored Brands, which we’ll look at in more detail later.
Some of the key metrics for measuring success with Amazon ads include:
Clicks: The number of times your ads were clicked in a given period. Amazon’s ads reporting has systems in place to detect invalid clicks (for example, accidental clicks) and will adjust the resulting data within three days of these occurring.
Impressions: The number of times that an ad was seen by Amazon users. This acts as a base for your ads’ click-through rate (the proportion of impressions that resulted in someone clicking on one of your ads).
Spend: The amount of money you’ve spent on your campaign, based on the number of clicks it’s attracted in a given period.
Sales: The total number of product sales that have been generated from the clicks on your ads within the reporting period.
Advertising Cost of Sales (ACoS): A metric that’s used to express the amount you’ve spent on advertising vs sales generated from your ads. This is calculated by dividing the total ad spend by the revenue you’ve generated from the same ad group.
Return On Ad Spend (ROAS): A metric used to measure the profitability of your ad campaigns, calculated by dividing the sales generated from your ads by your spend. A ROAS of 3, for example, shows that you’re generating £3 for every £1 spent on advertising on Amazon UK.
The Amazon advertising platform allows you to publish a few distinct ad types.
You can mix these ad types into a diverse, cohesive strategy, or channel more resources into a particular ad format to achieve a specific goal, like attracting new customers, highlighting an offer you’re running for a limited time, or retargeting customers who have made it some of the way down your pipeline without a conversion.
Here’s a closer look at the ad types available through Amazon advertising, their distinctive features, and the kinds of roles they can play within your Amazon advertising campaign.
Sponsored products are used to promote specific products in highly-visible areas of Amazon’s website, such as the top of search results, on other product’s listings, and other spaces.
You can target sponsored products by search terms, brand names, and competitor ASINs, or let the platform’s automatic targeting choose how ads are displayed based on what it determines will maximise the ads’ chance of success.
You’ll have the option to customise the ads’ targeting relevance, setting them up to target exact matches, close matches, or complementary matches. You can also adjust the maximum bid on each targeting type, allowing you to be more conservative or aggressive depending on the results you see from different approaches to ad targeting.
Sponsored Product ads don’t offer much customisation in the way they’re displayed, and will only show the basic details of your products, including the product title, image, star rating and price. This makes them a good option for top-of-funnel awareness building, gaining exposure for new products in your range, or targeting the flagship products of your close competitors. They can also provide an effective way to boost traction for slower-selling items, as it’s quick and easy to raise your campaign bids for stronger placements.
Like sponsored products, sponsored brands are a CPC ad format that appears on high-visibility areas of the Amazon website like the top of search results and detail pages. The key difference here is that sponsored brands are used to advertise your overall brand, rather than specific products.
Like sponsored products, you can budget sponsored brands campaigns with specific bids and tie these to different kinds of targeting relevance, such as exact match, close match, or complements. This ad type also provides some level of creativity, letting you choose from ad formats featuring your logo, customised ad headlines, links to your Amazon brand store, and even video assets.
As the name suggests, sponsored brands ads are particularly effective at building awareness for your brand as a whole rather than specific items, though they can be used just as effectively to generate sales for your flagship products.
Sponsored Display ads are the first Amazon ad type that allows you to target your brand’s audience both on and off Amazon. You’ll still get the opportunity to customise your brand’s bids and targeting methods, with the option to place ads based on audiences, product categories, and other options.
While Amazon display advertising has customisation options that differentiate the ads from the other types, they do still have a familiar Amazon aesthetic that will help inspire trust in shoppers who see your ads outside of the platform.
Instead of the targeting variables found in Sponsored Products and Brands, display advertising on Amazon gives you the option to target campaigns based on views, products, or audience. It’s worth noting that certain Sponsored Display options are only available to vendors with Amazon Brand Registry.
The Amazon Demand-Side Platform, often shortened to Amazon DSP, is an advertising platform that can be thought of as a scaled-up version of Sponsored Display. It allows you to buy display and video ads at scale using automated programmatic media purchasing.
Demand-side platform ads use a wealth of data on both shopper behaviour and Amazon ad types to optimise your budget and automatically choose which ad placements to buy and at what price.
Because of its off-Amazon focus, DSP ads are a great option for vendors who are looking to expand the scope of their advertising, and take a more “full funnel” approach that reaches their audience earlier in the purchase journey.
Because of its broader reach and advanced targeting options, Amazon DSP requires a higher minimum budget compared to the other ad categories we’ve listed here. However, if you’re able to meet this threshold, the Demand-Side Platform can be a highly effective way to boost visibility for your brand in new spaces and audience segments.
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With a diverse range of ad types and targeting options, Amazon advertising has tonnes of potential to expand your brand’s reach and unlock the potential of Amazon as a channel. However, with such a promising market, there’s some tough competition which you’ll need to approach with a well thought-out strategy and realise your brand’s potential.
Here, we’ll walk you through the key phases of building an effective Amazon ads strategy and maximising your potential for success.
Like other PPC platforms, Amazon relies on keywords in users’ search queries to determine their intent and serve up the most relevant results.
To build an effective Amazon advertising strategy, you’ll need to start by carrying out some keyword research and choosing the search terms that are most likely to be used by your audience.
Purpose-built Amazon tools like Jungle Scout’s Keyword Scout, MerchantWords, and Channable can all help you analyse popular search terms relevant to your product range. These allow you to access data sets like search volume (how many monthly searches the term gets), competition (how saturated with other bidders the term is) and relevance, helping you focus your resources on terms relevant to your audience’s intent.
To get your campaign started with the best chance of success, we recommend that you focus on “long tail” keywords that sit in a sweet spot between high volume and low competition.
When chosen for relevance to your products’ USPs, these search terms tend to have a higher potential for reach with your audience segments, while helping you minimise the average cost-per-click and optimise your campaign for profitability.
Once you’ve collated some high-potential keywords, your next step will be to allocate your advertising budget and decide on the bidding strategy you’re going to apply.
Firstly, your product’s lifecycle stage is going to have a big impact on the budget you’ll need to designate for your campaign in order to move the needle and start seeing results from your Amazon advertising campaigns.
Here are some general approaches to apply to different lifecycle stages:
New products: When you’re launching a new product for the first time, you’ll generally need to set a higher budget aside to build impressions and get some momentum behind your campaign. You may also have to cope with a higher ACoS while your campaign builds velocity.
Established products: If you’ve already put in some work to build awareness around your product, you’ll be free to set a more mid-range budget, and aim at maintaining the product’s current performance or make incremental gains.
Seasonal products: If you’re selling products that are better suited to particular holidays or times of year, then it’s best to adjust your budget to reflect the seasonal demand, increasing it during peak seasons and tapering it off when there’s less interest.
Inventory clearance: If you find yourself needing to clear out old inventory, then a raised budget can be useful for generating interest in a short space of time and secure quick sales.
When establishing a budget, it’s also crucial to set a target ACoS and ROAS that aligns with the broader profit margin you’re trying to achieve.
Your target ACoS should never exceed the established profit margin for a given product, as this will mean you’re losing money on sales driven by advertising. Your target ROAS, on the other hand, needs to be high enough to cover the cost of advertising and generate a profit.
Once you’ve factored in your product lifecycle and target ACoS / ROAS into your budget, the basic process of budget allocation and optimisation is:
Start running ads with a small budget to test the performance of keywords and ad creatives.
Monitor your ACoS and ROAS closely during this initial roll-out, then adjust your bids, keywords, or ad formats if you notice your ACoS getting too high or your ROAS getting too low.
Identify the campaigns that have shown a strong ACoS or ROAS, and gradually increase your budget for these to maximise their sales.
Reduce the budget for under-performing campaigns that are consistently missing your ACoS and ROAS targets.
Regularly review your ACoS and ROAS performance during periods of seasonal trends, promotional periods, or shifts in the competitive landscape.
Next up, you’ll need to set the bidding strategy that will determine how your ad budget gets spent with a view to maximising profits for your campaigns.
When first setting up a campaign, you’ll be prompted to choose either an automatic or a manual bidding strategy.
Automatic campaigns prompt Amazon to choose keywords and placements for your ad campaign based on what its algorithm determines will perform best. Because Amazon automatically targets ads on your behalf, you won’t be able to set the maximum bids for each individual keyword, just the overall budget for the campaign.
Automatic campaigns are often useful for data-gathering when you’re first getting started with advertising on Amazon, letting you leverage the power of Amazon’s algorithm to place your ads based on historical performance.
Later, manual campaigns give you full control over the keywords you’re targeting, the bids you’ll place on them, and other variables. This gives you the opportunity to fine-tune campaigns based on your own analysis, and take an approach to advertising that’s more aligned to your brand and audience.
Within either a manual or automated targeting, you’ll also need to set the dynamic or fixed bidding strategies offered by the Amazon advertising platform.
These strategies include:
Dynamic Bidding (Down Only): With down only dynamic bidding, Amazon will lower your campaign’s bids up to 100% when it determines your ad is less likely to convert. This strategy requires less direct management and tends to be a good choice for profit-driven campaigns, ensuring you can preserve your ad spend where there’s less chance of generating strong conversions.
Dynamic Bidding (Up and Down): Up and down dynamic bidding is similar to down only, except that the automatic adjustments can go both ways. Amazon will still decrease your bids by up to 100% when its algorithm determines there’s less chance of a conversion, but it can also increase bids by the same proportion when it looks like the ad has a good chance to convert.
This strategy can be a good option if your niche tends to be affected by highly variable bids and you’re trying to match this with increased flexibility. However, it’s crucial to budget carefully and ensure you’re comfortable with a cost-per-click that’s 100% higher than your standard bid, and keep a close eye on your spend when the campaign is in progress.
Fixed Bids: With fixed bids, you’ll set a specific amount that you’re willing to pay for ad placements, which won’t change outside of your own manual adjustments. Fixed bids can help you build more impressions compared to dynamic bids, but will have a much lower conversion rate. Due to this, fixed bids can have some limited use for building awareness for a new product, but we don’t recommend using them when it comes to generating conversions and profit.
Getting Amazon users to visit your listing is easy enough, but once they’re there you’ll need to convince them that the product is worth their money with an irresistible listing page.
Amazon listing optimisation is its own complex topic that requires careful research and implementation, but some general best practices to bear in mind include:
Writing compelling titles that showcase the product’s main USPs and include keywords naturally.
Highlighting the product’s key features and their related benefits in concise, but descriptive bullet points.
Utilising backend keywords with relevant search terms that were missed in the visible copy.
Using professional, high-resolution product images and infographics sized according to Amazon’s ideal image dimensions.
Utilising the A+ content section to showcase branded visuals and go into greater detail about the product’s features, uses, and benefits.
Like any other form of PPC, advertising products on Amazon is a continuous process where you’ll need to track the performance of your campaigns and make adjustments to get the best return on your budget.
Some of the most effective ways to monitor and improve your campaign over time include:
Looking beyond the surface metrics of ACoS and ROAS and targeting optimisations based on click-through rate, conversion rate, and search term reports.
Establishing a consistent, regular reporting schedule to monitor performance trends and make incremental adjustments.
Comparing data across time periods, campaigns, and ad types to identify trends or patterns.
Leveraging Amazon’s ad dashboards or third-party tools to create custom views based on your priority KPIs.
Developing a systematic plan for A/B testing in order to test different elements of your campaign, uncover new trends, and then use these to set up future campaigns for success.
Understanding the attribution models for different Amazon ad types, then using these to better contextualise your other metrics and understand the overall performance of your advertising strategy.
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While Amazon’s advertising platform continues to develop with sophisticated features to automate campaigns, it’s still crucial to adapt to the highly competitive landscape and tackle your ads with a detailed, well-rounded strategy.
We hope this guide has cleared up some of the confusion around advertising on Amazon UK and helped you articulate the best next steps for your brand. For more support with your ad campaigns, be sure to check out other blog posts, or get in touch to discover how our Amazon advertising experts can supercharge your campaign.
We’ll round up with some frequently asked questions about Amazon advertising for quick reference while you plan your next campaign.
How much should I spend on Amazon advertising?
Your Amazon advertising budget depends on your goals, competition, and product lifecycle. New products often require higher ad spend to gain traction, while established products may be able to generate good results with less. With any product or specific goal, it’s crucial to set a budget that aligns with your profit margins, and ensure that your advertising costs don’t outweigh your revenue.
What’s the difference between ACoS and ROAS?
ACoS (Advertising Cost of Sales) measures the percentage of sales spent on ads, while ROAS (Return on Ad Spend) shows how much revenue you earn per dollar spent. A lower ACoS and a higher ROAS indicate better ad efficiency and profitability, and both metrics can be used to evaluate campaign performance.
Which Amazon ad type is best for my business?
Different Amazon ad types tend to be more effective in different applications. Sponsored Products boost individual product sales, whereas Sponsored Brands enhance brand awareness, and Sponsored Display can be effective at retargeting. A combination of these ad types often works best for your overall success.
How can I improve my Amazon ad performance?
The best way to improve your Amazon ad performance is to continually monitor ACoS, ROAS, and conversion rates, and use your observations to optimise keyword targeting, adjust bids based on performance, and improve product listings with better images and descriptions. A/B testing ad creatives and other variables can also help refine your strategy.
Should I use automatic or manual campaigns?
Automatic campaigns help discover relevant keywords, while manual campaigns allow precise targeting and bid control. Usually, a combination of the two tends to work best, using automatic campaigns for data collection and manual to optimise and refine your most high-performing keywords.
How long does it take to see results from Amazon ads?
While it’s possible for ads to generate healthy profits within days, most require weeks of testing and optimisation. Regularly reviewing performance and making adjustments will improve results over time through continuous refinement.
How do I know if my Amazon ads are profitable?
Tracking ACoS, ROAS, and total sales can help you calculate the profitability of your Amazon ads. It’s important to ensure your ACoS stays below your product’s profit margin, and if customer acquisition is a focus, consider long-term profitability through customer lifetime value (CLV).
Can I target competitors with Amazon ads?
Yes, you can bid on competitor ASINs and brand names using Sponsored Products and Brands. Sponsored Display ads also enable retargeting. Whenever you’re trying to profit from competitor traffic, it’s crucial to keep a close eye on your costs, as competitor targeting can quickly become expensive.
What happens if my ad spend is too high?
If you notice your Amazon ad spend becoming too high, identify your high-cost, low-performing keywords and reduce bids or pause those campaigns, while improving product listings to boost conversions and shift your budget to more profitable campaigns.