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There has never been a better time to sell on Amazon. From 2019 to 2020, Amazon’s ad platform has grown by 41%. Pretty impressive for a platform that has only been around since 2008. 

Along with a boost in Amazon ad spend, sellers have also seen an increase in revenue. Based on our internal data, sellers saw their revenue steadily increase during the first half of 2020

With such great metrics, Amazon offers a fantastic opportunity for proactive third party sellers. 

Luckily for you, we’re going to walk you through the basics of Amazon PPC and how to get started on the best advertising platform for seeing a return on your ad spend.

The Foundations of Amazon PPC Advertising

Amazon advertising primarily uses a pay-per-click (PPC) model for its ads. That means you only pay when someone clicks on your ad, as opposed to paying when your ad appears in a search. 

Another key point in understanding PPC is the auction-style format Amazon uses for determining what ads appear on a search. Amazon PPC is an auction in which sellers bid on certain keywords. The highest bid is preferred to lower bids. That means you only have to bid one cent more than your competitors to gain an edge.

Coupled with bids, Amazon also factors in your ad’s performance to determine how it stacks up against your competitors’ ads. This performance metric is called Ad Grade. The exact formula Amazon uses to determine Ad Grade is unknown. However, there are some clear performance metrics and relevance metrics that factor in.

How Amazon Ranks Ads.

By multiplying your Ad Grade by your bid, you can find your ad rank. This is used by Amazon to determine which ads are shown. With a high Ad Grade, you could potentially pay less for clicks than your competitors and still be valued more by Amazon.

PPC Ad Types for Amazon Advertising

When you create your first Amazon PPC campaign, you’ll have to make some decisions. First, what kind of campaign are you going to run?

Amazon has three PPC ad types available to sellers:

  • Sponsored Products
  • Sponsored Brands
  • Sponsored Display
Three PPC ad types on Amazon.

There are pros and cons for each ad type, but for this post we’re going to mostly discuss Sponsored Products. They offer sellers the best return on ad spend and are the easiest for beginners to manage.

What Are Sponsored Products?

When a person searches for something on Amazon (let’s say “dog bed,” for example) the first few products that appear have a small “Sponsored” badge above the product name. These are Sponsored Products.

Sponsored products on Amazon feed.

For certain products, Amazon puts their AmazonBasics product at the top of the search engine results page (SERP). However, for most searches Sponsored Products are placed above the rest.

Building Your First Sponsored Products Campaign

To get started with your first PPC campaign, select Sponsored Products and then consider which type of targeting you prefer. Amazon offers two targeting methods: automatic and manual. We will go into the different targeting methods further below. 

You’ll also need to decide on your daily budget, the length of time the campaign will be active, and how you want to organize your campaigns by name and portfolio.

Sponsored product campaign settings.

You can also set your campaign bidding strategy at this point. If you want to give Amazon the power to raise and lower your bids, use dynamic up and down bidding. If you only want Amazon to lower bids when your ad is less likely to convert, select down only bidding. If you don’t want Amazon to change your bids at all, use fixed bidding.

Campaign bidding strategy.

You’ll also notice the option to adjust your bids by placement. If you’re interested in bidding different amounts based on where your ad is populated, check this out.

Everything else on this page is dependent on whether you select automatic or manual targeting.

Automatic Targeting for Sponsored Products

Automatic campaigns, or auto campaigns, give Amazon the reigns and automatically select keywords that your ad will appear for. Amazon looks for keywords that match your product’s category, related products, and keywords in its descriptions.

Auto campaigns offer some great benefits to all sellers, but these are especially great for beginners:

  • Easy set-up
  • Amazing for data collection
  • Lowers the risk of making a critical mistake

We suggest that every beginner start off with an automatic campaign. All too frequently, sellers create their first campaign and don’t use an auto campaign. What happens? They use tons of irrelevant keywords and wonder why their ad spend is essentially going down the drain. 

We call this keyword dumping, and by starting with an auto campaign you can find effective keywords you had never even thought about.

While automatic campaigns are great for beginners and have their place in every seller’s account, there are some drawbacks. For one, with less control over your campaign and a reliance on Amazon’s algorithm to find relevant keywords, you’re bound to end up bidding on irrelevant terms.

If only there was a way to tweak your auto campaigns to limit your exposure to irrelevant keywords. Oh wait, there is!

After you create your campaign, you have the ability to change the bid placed on each targeting group. You could also do this when initially creating a campaign.

What can be tweaked? Let’s say we’re selling a box of 48 Crayola Crayons as an example.

  • Close match - Our product would show up for a search for “Crayola Crayons.”
  • Loose match - Our product would appear for the search “School supplies.”
  • Compliments and substitutes - Our product would appear in front of shoppers who looked at similar products or our direct competitors.
Automatic targeting settings.

If you don’t want to mess with these on your first go around, you can always just stick with the default bid.

Manual Targeting for Sponsored Products

Manual campaigns are also set up in the campaign manager within Seller Central. With a manual campaign, sellers pick the keywords and products they want to bid on. This gives you 100% control over what is being bid on, unlike an automatic campaign where you give most of that control to Amazon.

To be frank, manual campaigns are geared towards advanced sellers, but it’s still vital that you understand them.

When first creating a manual campaign, you have to decide whether to target keywords or products.

Selecting type for manual targeting.

Keyword Targeting for Manual PPC Campaigns

Keyword targeting is pretty straightforward, on the surface. You pick the keywords, set the bid, and launch. However, it’s also important to realize that this targeting method is very time consuming, and can cause you headaches if you don’t stay on top of it.

If you have no idea what keywords to use, use an auto campaign to conduct some real research. Don’t use a keyword generator and put 500 keywords into a campaign with no data to back them up. You might as well burn your money if you go that route.

For keyword targeting, there are three different match types:

  • Broad match: Contains all the keywords in any order and includes plurals, variations and related keywords.
  • Phrase match: Contains the exact phrase or sequence of keywords.
  • Exact match: Exactly matches the keyword or sequence of keywords.

Product Targeting for Manual PPC Campaigns

With manual campaigns, you can also target specific products. This is also known as ASIN targeting. An ASIN is an Amazon Standard Identification Number that every single product on Amazon has. Product targeting allows you to latch on to a specific product and follow it wherever it appears.

Manual Product Targeting.

Let’s say you’re Nike, and you’ve made a shoe that is in fierce competition with a shoe made by Adidas. With product targeting, Nike can have a Sponsored Product ad for its shoe appear wherever an ad or organic search shows that specific Adidas shoe.

You can also use categories to target products. When using categories you’re latching onto a lot of products that are in a specific category like “running shoes” or “training shoes.”

Which Targeting Type is Right for You?

We’re firm believers in telling beginners to start with automatic campaigns, but there is clearly a time and place for both. As you become more familiar with Amazon PPC, you’ll find that manual campaigns offer so much more opportunity to optimize.

Still wondering which campaign type you should use?

Auto vs Manual targeting.

Negative Targeting

When setting up your campaign, you can also use negative targeting. Negative targeting ensures that your product won’t appear for certain keywords or alongside certain products.

Excluding irrelevant search terms is a great way to block certain keywords  from automatic and manual campaigns. If you’re launching an auto campaign for fish oil pills, you don’t want your ad to appear for protein supplements, so using a negative keyword would be helpful.

Negative targeting match type.

Of course, identifying irrelevant search terms may be difficult when launching your first campaign, but after seeing what results your first auto campaign generates you can make adjustments for future campaigns. 

Negative product targeting allows you to block your ad from appearing alongside certain products or brands. If you have a campaign that is only geared towards poaching your competitors’ potential customers, you can block your ad from showing up with products from your brand.

Negative product targeting.

Ad Groups

Now that everything is set-up at the campaign level, it’s time to look at building an ad group. Within campaigns, ad groups allow sellers to be more specific with their targeting. 

For example, using our dog bed example from earlier, you could have ad groups for dog beds, dog chew toys, and dog food if you sell all kinds of pet products.

If you’re finding this whole structure confusing, don’t worry. We made a map showing where everything is inside your Seller Central account.

Amazon PPC Account Structure

Sponsored Brands and Sponsored Display

We’ve covered basically everything there is to know about launching your first Sponsored Products campaign. Now let’s look at the other ad types that Amazon offers.

Sponsored Brand Ads

Sponsored Brand ads are somewhat similar to Sponsored Products in that they showcase products only on Amazon’s website. When you look at a SERP, a Sponsored Brand ad will appear in one of three ways:

Sponsored brand ad formats.

Sponsored Brand ads are incredibly competitive right now, and that’s the main reason why we suggest new sellers steer clear of them when first starting. However, with experience, sellers can use Sponsored Brand ads to showcase three of their products on a SERP.

Sponsored Display Ads

Sponsored Display ads take Amazon advertising off of Amazon’s website by displaying ads on third party websites as well as Amazon.com. Sponsored Display ads are the “new kid on the block” when it comes to Amazon PPC, and certain aspects of Sponsored Display ads don’t even follow a PPC format.

Because of the different advertising model and the difference in sales and views attribution, we recommend that even experienced sellers only dabble with Sponsored Display ads for now. For beginners, the ROI just isn’t large enough to justify spending your time and money on it.

Key Takeaways

That’s it, folks! Everything you need to know to get started with Amazon PPC. Just to review:

  • Start with Sponsored Products.
  • First, launch an automatic campaign to get quality keywords, learn from that, and make changes based on the data.
  • Once you’re ready, branch out and explore all the opportunities Amazon provides sellers.

Also keep in mind that this post only covers how to get started with Amazon PPC. If you truly want to become a PPC master, check out all of our content on optimizing your campaigns.

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