The Beginner’s Guide to Advertising on Amazon

When it comes to selling physical goods in the digital realm, no company does it better (or at a greater volume) than Amazon.

As the world’s largest online retailer, Amazon accounts for nearly 14% of all retail e-commerce sales worldwide. And while sites like Facebook and Google usually account for a majority of the discourse surrounding digital advertising, Amazon has quietly become an essential tool for seeking out and engaging consumers who are already at the buying stage of their journey.

But what kind of ads can you run on Amazon? What do you need to start, and how can you maximize your return on investment? To answer these questions and more, we’ve put together this guide on the subject. Follow along as we show you how you can make Amazon Advertising a key player in your arsenal of digital advertising tools.

What are Amazon ads?

Amazon offers a wide variety of advertising formats, and choosing the right one depends on which goals you’re hoping to achieve. Below, we’ll break down some of the most relevant types of ads on Amazon.

Sponsored Products: 

Sponsored Products are a “cost-per-click” (CPC) advertisement that promote individual products using automatically generated ad creative. These self-service ads appear in shopping results and on product detail pages.

Sponsored Products help increase visibility of your products and increase sales on a platform other than your ecommerce website. Because Amazon Sponsored Product ads are charged on a cost-per-click basis, you have the ability to control how much you spend by choosing a budget and setting your CPC amount. In other words, you get to decide the maximum amount you’re willing to spend per click.

Sponsored Products are available for professional sellers, vendors, book vendors, Kindle Direct Publishing (KDP) authors, and agencies. 

Sponsored Brand Ads:

Sponsored Brand ads are cost-per-click ads that appear in shopping results and feature a custom headline, brand logo, and multiple products. 

Sponsored Brand ads help to drive awareness by showcasing your brand along with multiple products at the top of search results page. When a shopper clicks on your Sponsored Brand they have two options: 1) click on your logo which will lead to either your brand store or a custom landing page, or 2) click on a product in the ad and they will be taken to that product’s page.

Sponsored Brands are available for professional sellers enrolled in Amazon Brand Registry, vendors, book vendors, and agencies.

Sponsored Display Ads:

Sponsored Display Ads are automatically generated cost-per-click ads that target audiences based on relevant Amazon shopping interests. With these ads, the advertiser has the option to set parameters for which audiences they’d like to target — this makes it easier to get your products in front of the right group of people. Sponsored Display ads engage with customers both on and off Amazon.

Sponsored Display ads are available to professional sellers enrolled in Amazon Brand Registry, vendors, and agencies with clients who sell products on Amazon.

Videos Ads:

Use videos in ads on Amazon sites (like Fire Tablet/TV) and Amazon-affiliate sites (IMDB.com, Twitch, etc.) across the web. There are two types of video ads available on Amazon:

1. OTT Video Ads (Over-the-top video ads): These allow you to show your brand content over the internet with a streaming device (e.g. Fire TV).
2. Online Video Ads: These will reach customers with both in-stream and out-stream videos on Amazon affiliate sites across the web.

Both options are clickable ads that can link to a product page on Amazon, your own website, or any other destination on the web!

It’s also important to remember that, when using Amazon video ads, you should take advantage of Amazon’s audience data — doing so will ensure that your content is targeting the customers that matter.

What are the benefits of advertising on Amazon?

No matter which way you look at it, if you’re selling physical goods, Amazon is a fantastic place to advertise. With their wide variety of advertising products, the platform is ideal for building out your brand, whether you’re looking to drive awareness, boost consideration, or inspire purchases.

It’s also worth noting that Amazon has a deep understanding of how shoppers engage with products and brands while they search online. As an advertiser, that information is invaluable to you, and with Amazon you can leverage it to hit your advertising goals.

Many customers choose Amazon over other online retailers because the site is an easy-to-use, one-stop destination to discover, research (through trusted customer reviews), and purchase products. When it comes to online advertising platforms, Amazon is unique in that you can target customers who are already in the buying phase of their journey. 

What are the requirements to get started advertising on Amazon?

1. Account – To advertise on Amazon, you must have an active professional seller account. If you’d like to use Sponsored Display, Sponsored Brands, or Stores, you have to be enrolled in the Amazon Brand Registry.
2. Featured Offer (formally known as the Buy Box) – The products you advertise need to be eligible for Featured Offer placement. (The Featured Offer is the offer near the top of a product detail page where customers can add to their shopping carts. Your offers are eligible for the Featured Offer if you have a professional seller account.) 
3. Products – Your products must be in one or more of the eligible categories in order to advertise. Currently, Amazon does not support adult products, used or refurbished products, and products in closed categories. You can view the full list of what is and isn’t allowed on Amazon’s sponsored ads policies page.

Who’s a good fit for advertising on Amazon?

As mentioned in the previous section, your product must be in one or more of the eligible categories in order to advertise on Amazon. Generally speaking, if you are selling a material product, versus a service, advertising on Amazon is going to benefit your sales. 

However, being eligible doesn’t necessarily mean that advertising on Amazon is right for your products. There are a few categories of products that you may want to reconsider selling on amazon:

1. Products that Amazon already sells: Think Amazon TVs or Amazon Fire Tablets. Because Amazon itself is a trusted brand, their customers are most likely going to trust and purchase straight from them over another seller.
2. Complicated products: If you’re bringing a new product to the market that requires a learning curve, you may be better served by advertising elsewhere and sending customers directly to your website, which you can use to educate consumers. That being said, if you create a stellar brand store on Amazon that includes detailed descriptions and videos, you may be able to drive customers to your store using Sponsored Brand Ads. The risk you run here is that customers simply won’t be searching for a product they do not know exists.
   

How much will it cost?

The beauty of advertising on Amazon is that you can spend as much or as little as you’d like. The most common ad types, Sponsored Products and Sponsored Brands, are both cost-per-click based ad formats — that means that you can set a budget with your desired amount and you’ll only be charged when a customer clicks on your ad. CPCs are going to be different for every product depending on the competition, your budgets, and goals. However, according to AdBadger, in 2020 the average CPC for an Amazon Seller was $0.71.

How should I set my cost-per-click amount? 

Knowing how much your CPC amount should be may seem like a daunting task, but it’s actually pretty straightforward. The easiest way to do this is with a formula — there are a few different ones that will allow you to determine your CPCs based on your goals.

For example, if you’re looking to get a Return on Ad Spend (ROAS = Revenue/Spend) of $4, then you can use either of the following formulas to set your CPC amount:

CPC = (Revenue/Clicks)/tROAS

or

CPC = (Conversion Rate * AOV) / tROAS

In this case, if you were looking to get a ROAS of $4, then you would use 30-60 days of historical data for both my Revenue and Clicks. Let’s say over 30 days you made $20,000 in revenue with 100,000 clicks — here’s how you would figure out what to set your CPCs to:

CPC = (Revenue/Clicks) / tROAS

CPC = ($20,000/100,000)/4

CPC = 0.2/4

CPC = $0.05

Alternatively, if you knew your 30-60 day Conversion Rate was 2.5%, and your AOV (Average Order Value) was $8, you could use that information to figure out what your CPCs should be set to:

CPC = (Conversion Rate * AOV) / tROAS

CPC = (0.025 * $8)/4

CPC = 0.2/4

CPC = $0.05

Where should I begin?

This is a question we get asked often — with so many different ways to advertise, where does one begin? We recommend starting out by identifying your advertising goals. The reason behind this is simple: Determining what your goals are will help you decide which KPIs you should focus on. Do this by asking yourself some simple questions about your desired outcomes: 

Second, decide on which ad types you are going to run. I highly suggest starting with automated Sponsored Product ads, as these are going to be the quickest and easiest way to get your ads up and running.

Next, you will want to decide on a budget. This is going to vary with every business and depending on your goals. I would suggest starting small and with your most popular products. They are going to yield the greatest returns and from there you can begin to scale. 

Lastly, you will want to think about your creative. The beauty of Amazon is that many of the ad types don’t require creative as they will just pull your product image for you. If you’re going to be venturing into video, you will want to use this spec sheet provided by Amazon.

Tips for success

1. Set goals. Before you do anything on Amazon Advertising, make sure you know what KPIs you are measuring for: 
   1. Awareness: Impressions, brand recall lift
   2. Consideration: Traffic, store visits, video views, product page visits
   3. Conversions: ROAS, sales
   4. Loyalty: Repeat purchases, store visits, “subscribe and save”
2. Use automated targeting to get started. The quickest way to start advertising with Amazon is through automatic targeting. With automatic targeting, Amazon will match your ads to relevant shopping queries and products, eliminating the need for you to manually set up keywords. 
3. Start small. Start running Amazon ads on a small group of your top selling product(s). This will yield the highest return, and you can expand from there. 
4. Give it time! Once you make changes to CPCs, give the campaign at least a week to collect data using the new CPCs before you make any additional changes. 

To recap: If you use it right, Amazon Advertising can be a major source of new business and offer a great return on investment for advertisers. 

The platform offers several different kinds of ads, with each one tailored to the kind of result you want to achieve. The price is also extremely manageable, as the cost-per-click advertising model lets you choose exactly how much you’re willing to spend on a campaign. 

Finally, if you’re just getting started in the advertising world, Amazon has great automation features that make it easy to get your ads up and running without having to invest time and money on consumer research or creative.

How can Wheelhouse help?

Still not sure where to start? We can help. Whether you have a simple question you need answered, or you’re looking to start a longer conversation, our digital advertising team is standing by, ready to field whatever questions you throw at them. With our long-standing record of partnering with our clients to produce stellar results, we’re certain we can help you reach your business goals. Drop a line, or leave a comment below to get in touch.