Amazon Ads 101: Basics of Advertising on Amazon

We’re interviewing Envision Horizons’ Director of Paid Media, Colin Bashor, on all things Amazon ads. Our first interview is geared towards newcomers to selling on Amazon. We’re breaking down at a fundamental level what advertising on Amazon is, why it works, and how brands can get started. We discuss what search advertising is, explain DSP […]
Written By Tristan Williams
Published on March 24, 2023   |14 minute read

We’re interviewing Envision Horizons’ Director of Paid Media, Colin Bashor, on all things Amazon ads. Our first interview is geared towards newcomers to selling on Amazon.

We’re breaking down at a fundamental level what advertising on Amazon is, why it works, and how brands can get started. We discuss what search advertising is, explain DSP advertising, and touch on the concept of non-endemic vs endemic. For a brand that doesn’t have internal expertise related to ad management, we discuss how to get started and how you know if you need to outsource. Finally, Colin goes over the biggest mistakes he sees brands making with self-management of ads, and common mistakes that even professionals tend to struggle with.

What is Amazon Advertising, How Does It Work?

Paid Placements in Amazon Search

Amazon has a variety of placements that you can leverage to increase your visibility on Amazon. The most important placement for someone new to Amazon to understand is sponsored product placement in the Amazon SERP (search engine results page). When any customer searches for a product on Amazon, the SERP will show relevant listings for that customer’s search query. Usually, at the very top of the search, there are going to be products that have a small “sponsored” label underneath. That means that a seller has paid for that placement, as opposed to having an organic high-ranking placement. For organic placements, when you have good sales on a search term you will be placed higher up in the search. However, as mentioned, with Amazon advertising you can pay to “skip the line” and appear at the top of the SERP. The most obvious benefit here is that your product is displayed where most of the visibility can be gained – near the top! Most customers won’t scroll all the way down the page, the first 8 listings in search results are going to collect the majority of sales. While paid positioning provides an opportunity for exposure, it also brings other benefits….

How Amazon Ads Can Boost Your Organic Rank 

If you pay to appear at the top of results for a search term, you will likely be making a lot of sales. Amazon’s algorithm will record all of these sales with the same weight that it records organic sales, meaning your sell-through rate will increase thus improving your organic rank. In other words, the sales you make through paid placements will help move you up in your best seller rank on that keyword in your category, allowing you to also collect additional organic sales.

Amazon Ads PPC (Pay-Per-Click) 

To conclude, at a very basic level, Amazon advertising is essentially just pay-per-click. Every time that someone searches for a term, there is a possibility of a placement, and then anytime somebody clicks on your advertisement they will go to your detail page and you’ll pay a price for that click. 

How Can Brands Get Started with Amazon Ads?

It’s relatively simple to get started with advertising on Amazon. Head to your Seller Central account, in the drop-down menu, click on Advertising to go to the Ads Portal. 

You can either choose to only pay for ads out of your Seller Central balance based on the sales that you’ve made and Amazon will simply deduct that amount from what they pay you.

Alternatively, you can put in a credit card or other payment option, and Amazon will charge through there. The benefit of putting in a credit card or other payment option is that you’re able to sell at a negative-  so even if you don’t have total sales out yet you are still able to pay for

those advertisements and your ads won’t be shut off due to a lack of balance in your Amazon Seller Central account.

Search Advertising vs DSP Advertising

Search advertising is sort of the basic way that you are going to appear on Amazon-  anytime somebody is searching for a term you agree for a bid at a click price where you are paying per click. When a potential customer sees your advertisement, you’ll appear either at the top of the search in what’s called a sponsored brand placement or in a sponsored product placement.

A Sponsored Product placement just looks like a typical Amazon listing, with the difference being it will have a “sponsored” label underneath to show it is a paid advertisement. 

A Sponsored Brands ad will appear at the top of the search above the product listings- these placements were previously called “headline search ads”, which is a more descriptive term.

Sponsored Brands and Sponsored Products Ads
Search Advertising

DSP Advertising 

Amazon DSP stands for “demand-side platform”, and it allows advertisers to programmatically buy ad space on Amazon.com and other Amazon-owned websites. Amazon DSP provides access to exclusive inventory, including first-party data, and offers unique targeting capabilities that allow advertisers to reach their desired audience. Advertising on Amazon DSP can help you increase brand awareness, drive traffic to your website, and generate sales.

Amazon DSP is unique in that it allows advertisers to expand their advertising reach beyond Ad Console and utilize both on-Amazon and offsite placements. This enables advertisers to drive traffic not only to their Amazon pages, but to their direct-to-consumer websites.

DSP Benefits

  • Utilize relevant amazon shopping data and custom targeting segments to identify consumers within your target audience.
  • By utilizing Amazon’s data and the platform’s reach, you can access specific target audiences with high purchase intent.
  • With rising Facebook advertising costs, Amazon is a new incremental option for better ROI on ad spend.
  • Amazon DSP utilizes a non-disruptive advertising style, preferred by many consumers.

“DSP is usually what I would recommend for any brand that is sort of capped out on the search advertising growth side. DSP lets you reach a new market by going on and off Amazon, and you can actually target people who have either indicated an interest in a product type, or fall into a particular lifestyle segment on Amazon with their first-party or third-party data. Through more advanced targeting, DSP allows you to go outside of your normal market, which is usually where you have more room to grow.”

-Colin Bashor, EH Director of Paid Media

Amazon DSP has limited access compared to Amazon’s other advertising solutions. As Amazon’s DSP is not widely accessible, advertisers will need to partner either directly with Amazon or with an Amazon agency (such as Envision Horizons) with access to DSP. 

Pricing for ads through Amazon DSP varies depending on format and placement. Self-service customers are in full control of their campaigns, and there are no management fees. The managed-service option typically requires a minimum spend of USD $50,000 (minimum may vary per country). For brands that want to outsource ad management or don’t want to meet Amazon’s high monthly minimum spend, the alternative is to work with an agency.

Access to the Amazon DSP is limited to select agencies. With Envision Horizons agency access, we are able to offer the opportunity for brands (and non-endemic businesses) to utilize Amazon DSP. The minimum spend required for Envision Horizons to manage advertising through DSP is $10,000 USD. If you are interested in learning more, please contact the Envision Horizons team through our website here.

Non-Endemic vs Endemic Amazon Ads

Endemic advertising is an advertising and marketing term that refers to ad placement that’s natural to a market. The ads in endemic advertising contextually belong to the markets and sites they’re placed on. For example, a cosmetics company that sells lipstick on Amazon that uses Amazon advertising to drive traffic to their listing is participating in endemic advertising.

In contrast, non-endemic advertising entails advertising on a platform where your product is not actually sold, meaning it does not “naturally” belong to the market/ site they’re placed on. For example, an insurance company cannot have insurance plans listed for sale on Amazon’s platform, but they can place ads on Amazon’s platform targeted toward consumers that they have identified as being “in the market” for insurance offerings. DSP ads allow these non-endemic advertisers to send traffic to their DTC sites, where the sale can be made.

“What I would recommend for brands new to Amazon is to begin with just basic pay-per-click advertising. To start, set up really basic campaigns on your branded terms so that if somebody’s searching for your brand they’re finding you and they’re not seeing a competitor appear above you in the search ranking. 

After starting with your brand, you can then move on to more general terms. For example, if you’re selling a surge protector, a category term would simply be “surge protector” so you’ll want to set up some basic campaigns that are targeting terms like those. 

This is all on the search side with pay-per-click as the payment model. For brands just getting started, get some basic campaigns out, see how much you spend, and figure out if there’s any optimization that you need to make. In other words do some testing- see how campaigns perform, and make changes based on your results.”

– Colin Bashor, EH Director of Paid Media

Common Amazon Advertising Mistakes

Assuming Expertise with Other Search Platforms will Apply to Amazon Ads

Adept advertisers on other platforms (such as Facebook Ads or Google Ads) often struggle to adjust to the nuances of Amazon Ads- skills may not translate. Without specific Amazon experience, it may be difficult to see success even for those familiar with common online advertising techniques. Additionally, troubleshooting your ads on Amazon if you’re not experienced with the platform can be difficult. 

Amazon advertising requires tailored approaches adjusted for Amazon’s specific complexities – a journey that involves meticulous testing and patience.  There isn’t an easy shortcut to becoming an Amazon advertising expert.

Turning on Auto Campaigns (Setting It and Forgetting It)

Beware of the temptation to rely solely on Amazon Auto campaigns. There are a lot of relatively intelligent campaigns that can be set up with minimal manual effort, but it’s important that settings are carefully customized. Automated campaigns can spend a lot of money quickly, make sure your budget doesn’t spiral out of control.

Also keep in mind that Amazon is not a set-it-and-forget-it platform, and advertising isn’t a magic wand; success requires dedicated effort! Amazon should be thoughtfully managed and campaigns should be frequently audited and optimized for success.

Spending on Amazon Ads Without Optimizing for Return on Investment

Investing your budget wisely is crucial to success on Amazon Ads. To avoid wasted spending, it’s important to start small and optimize for return on investment when allocating ad spend.

“It’s very easy to spend a lot of money very fast on Amazon ads without necessarily getting a return on them. Be careful to make sure you’re starting slow, not putting a lot of high budgets out there because you can throw a lot of money into the pit all at once.”  – Colin Bashor, EH Director of Paid Media

Running Out of Ad Budget 

If you’re not strategic with your budget it could leave your campaigns without a steady stream of ads running. Without ads serving for extended periods of time during the day, valuable net sales are likely to slip through the cracks and be lost.

Poor Campaign Organization

Not separating out your branded, your category, and your competitor terms on Amazon is one of the easiest organizational mistakes to make that can result in a lot of issues down the line.  

For example, you could have a really good-looking campaign and think “I’m only spending 8% of my total here”. However in reality you might be getting a ton of sales on branded terms, but your category and competitor terms are performing really poorly. Branded terms are great for protecting your brand, but category terms are where you would be more likely to acquire new-to-brand customers, which is extremely important for growth on Amazon. So in this situation, you would want to be aware that your category terms are performing poorly! If everything is jumbled together you won’t be able to easily assess performance and make optimizations. 

Campaigns should also be broken up in a way that allows you to easily assess what your return on ad spend is. 

The biggest way to avoid major organizational issues is to have a strong naming convention in place. With a set structure for how you name and create your campaigns, your Ad Console won’t get messy and you will easily be able to track metrics and assess performance. 

Not Dedicating Time to Amazon Ads / Not Knowing When to Outsource

Investing 15-20 hours each week into your Amazon ads can ensure that you remain competitive. If you can’t have someone on your team dedicating this team, it is a sign you should consider outsourcing. 

To maximize efficiency and reduce manual labor without sacrificing performance, consider outsourcing your Advertising efforts with a dedicated agency (such as Envision Horizons) or utilizing a third-party ad management platform. 

Why Invest in Amazon Ads?

There’s no doubt that Amazon is a major player in the realm of digital advertising. For brands looking to reach shoppers on Amazon, now is the time to invest in Amazon Advertising. With its massive customer base and wealth of data on shopper behavior, there’s no better platform for reaching potential customers and driving sales.

Envision Horizons Advertising Services

Build your full strategic media plan with experts in the Amazon space. Founded in 2017 as a full-service Amazon Agency, Envision Horizons has helped hundreds of brands grow and succeed on Amazon managing over $150M in Amazon sales annually. In 2020 Business Insider recognized Envision Horizons as one of the Top Amazon Advertising Agencies to work with. In 2022, Envision Horizons was recognized as a US finalist in the Brand Building category from the Amazon Ads Partner Awards.

Envision Horizons specializes in designing full strategic media plans, bringing clients the best return on every incremental dollar. Reach out to us to learn more about why you should be utilizing Amazon advertising.

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