What are Sponsored Ads and How They Work

What are Sponsored Ads and How They Work

Amazon Sponsored Ads are a pay per click (PPC) advertising service for Amazon sellers to increase the visibility of their products. It operates as an auction for ad space where sellers bid on relevant keywords. When a customer searches on your keyword, your ad will enter the ad auction with the bid you specified and your ad will win the ad space if you placed the highest bid for it.

What is Ad Space

Ad Space refers to the location where your ad will appear. This may appear at the top of the search results page or in product detail pages. However, placements will differ by the amount of bid and ad relevancy.

How Does Ad Relevancy Affect Ad Placements

Amazon offers a wider range of products for customers to choose from. Ad Relevancy includes the product’s organic ranking that is measured by the quality factor.

Better-selling products tend to be listed at the beginning of the search results when a customer searches for a specific keyword. Using Amazon Sponsored Ads will increase your product’s probability of being placed at the beginning of the page which will gain more visibility thus more chances of a customer clicking it.

What is Quality Factor

The quality of an Amazon ad is measured by the chances of a customer clicking it. This is comprised of the ad’s applicable click history as soon as the ad has been active for a while.

This would mean that if you have a higher bid when competing with ads of the same quality this will allow you better ad placements. And if your ad is of higher quality, the less you will need to bid for your ad to appear in better/first placements.

What is Default Bid or Cost Per Click

Default bid, also called Cost Per Click, is the maximum amount you are willing to spend every time your ad is clicked. The bid together with the ad relevancy will determine whether or not your ad will be shown.

A default bid can be set on an ad group level which consist of different keywords or the seller can as well set different bids for different keyword.

Winning the Auction

When winning the ad auction, you will only need to pay $0.01 higher than the next highest bidder.

In return, Amazon will show your ads until your keyword bids may be too high for your daily budget or if your daily budget is depleted.

The daily budget is a cap that you are willing to spend across all ads in your campaign list each day over a calendar month. Once your ad spend reaches the maximum cap you are willing to spend, Amazon will pause your ad automatically until the next day.

How much should you spend on Amazon PPC

In most cases, there are many different products in one ad group that share the same keywords. The optimal CPC bid differs according to keyword and their activity.

To determine the bid for your keywords will depend on how much you are willing to spend. Amazon’s minimum bid for sponsored ads is at $0.02 and suggested bids are also available for some keywords.

When to adjust bids

Amazon’s advertising reports have several days latency which means that it will take 48-72 hours at most for conversions to be reported. Once a good amount of data is collected, you can see which keywords are working and which are not. Optimizing the campaigns will greatly reduce your spend and cost.


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