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Why is Amazon PPC Advertising So Expensive & What Strategies Can I Use To Skirtail This? 

Best Practices / September 2, 2021

If you are a seller on Amazon (or just a savvy customer), you probably have noticed an unsettling trend – many of the first-page positions on Amazon are filled with sponsored ads. Of course, if you are Amazon, this is great because it means more money is being spent on PPC which is a robust money-maker for the conglomerate. 

However, this trend of uprising spend on PPC has undesirable impacts on sellers that wonder how they are going to continue affording this up-tick of ad spend – particularly in conjunction with the rise in shipping and storage costs. 

Of course, the utilization of Amazon’s own marketing algorithm is one of the top driving forces to increase visibility, traffic, and sales for online retailers. But how much is too much and what ways can merchants utilize PPC to help drive organic rank? Furthermore, with a growing number of placements to utilize sponsored ads (including DSP), it’s become crucial to stay savvy when it comes to your PPC strategy.

We know. It’s a lot to unpack. But we’re here to help. 

Amazon PPC advertising

First off, Why Has Amazon Sponsored Ads Become Expensive?

In recent months, PPC has increased (on average) to $1.20 per click. This is up 30% from $0.93 at the start of 2021 and up over 50% year-over-year. Demand for advertising and coveted placements is rising faster than the ad availability on and off Amazon, thus driving up advertising prices. You can see this demand simply by looking through Amazon’s catalog. Virtually no real estate is without some sort of product ad. 

According to this article by Marketplace Pulse, the average cost-per-click (CPC) was $0.85 in 2020. It reached the lowest point of $0.70 in early May of 2020 when the pandemic caused supply chain disruptions which then created inventory issues. This forced many merchants to forgo advertising due to a lack of inventory. Rounding into Q1 of 2021, the average cost per click was $0.90. 

The average ACoS for most retailers in 2020 was around 22%, rising to 25% in the first 2 quarters of 2021. The average advertising cost of sale (ACoS) was 22% in 2020. It has now risen to +30%. 

Amazon has turned most widgets on its website and app into paid-for advertising inventory. It hasn’t increased the number of ads in search results for a while, however. Since most of the ad spend on Amazon is for sponsored product results in search, that has caused CPC to rise as more brands advertise on Amazon. Nevertheless, ad prices have increased across all Amazon ad types.

To make matters worse for SMBs, larger, bigger players have started taking over the ever-popular marketplace, bringing with them insatiable advertising spends. As a result, they can afford to compete for ad space AND afford higher bids. 

Enter The Amazon Aggregator

But it’s not just large companies like Nike or Apple or Dunkin Donuts that have the means to spend accessive amounts on advertising while inadvertently driving up the average cost-per-click for everyone else.  M&A companies and aggregators also have the power to do just this. According to Nozzle, “Sellers that choose to independently run their Amazon brands face massive competition from brands operating via Amazon Aggregators. These companies have huge funding which means they can scale more quickly due to increased investment in that brand.”

And often that huge funding is made possible (at least in part) as a result of being able to funnel more money through amazon advertising. This, in turn, not only increases aggregated brand’s likelihood of sales – it also increases public brand awareness as well as helping with organic ranking which perpetuates even more sales and a larger profit gap between SMBs and M&As. 

What Do Increased PPC Average Costs Mean For Regular Amazon Sellers?

Using omnichannel advertising and marketing funnels definitely helps diversify your portfolio and costs while reaching a wider audience. However, if you are selling on Amazon, PPC will always be a must. It’s kind of like drinking as much as you want without the hangover – one rarely works without the other. 

So, what do you do if you own a small Amazon business and still want to compete? In short; you have to work smarter, not harder.

Here are a few strategies you can implement to keep your PPC costs at bay while competing in what seems to what may sometimes feel like a monopolizing market. 

Make Sure Your Product is Directly Relevant To The Targeted Keyword

If you are selling women’s winter boots that are NOT snowproof/waterproof but you bid on the keyword phrase “women’s waterproof snow boots”, you’re just setting yourself up for a lot of clicks with no conversions. Or, even worse, you make the sell but then get returns and bad reviews because you weren’t honest with the pretense. 

Use Amazon’s Bidding Strategies and Placements Correctly

Amazon's Bidding Strategies and Placements

Don’t take keyword bids at face value. Depending on the bidding strategies you employ at the campaign level, a $1 bid can turn into a $20 bid in real-time.

What does “Bids by Placement” refer to?

Bids by Placement is the ability to change your bids depending on where your ads are shown. So, this is a way for Amazon to say that if you like to bid more for certain placements, then they can show your ads in those placements. Moreover, it is through bids placement that you can win a bid when there’s competition. You’ll be competing for opportunities, and the higher you bid, the more likely you’ll be picked between top-of-search, mid-page, and product page. 

Why is this important?

Bids by Placement gives you a chance to:

  • Increase Bids by Specified Amounts
  • Change Default Bids Dramatically

What is Dynamic Bidding?

In comparison to Bids by Placement, wherein you focus on your competition, Dynamic Bidding puts emphasis on the likelihood of conversion based on buyer behavior. And understanding buying behavior is what decreases your PPC costs if you understand it well enough.

Here are the 3 Bidding Strategies

  1. Dynamic bids (down only): Amazon will lower bids in real-time if your ad may be less likely to convert to a sale.
  2. Dynamic bids (up and down): Amazon will raise bids by a maximum of 100% for Top of Search and 50% for other placements in real-time if the ad may be more likely to convert to a sale, while lowering bids when the sponsored ads are less likely to convert.
  3. Fixed bids – Amazon will use the exact bid and won’t change bids based on the likelihood of a sale.

Try Placing Sponsored Ads on Products “Related To/Used In Conjunction With” Your Product

Now, we know we just told you to only run sponsored ads on keywords directly relevant to your product. However, a different tactic is to run ads on products that may be in your same category or field of interest. For example, if you sell protein powder and you aren’t competing well among other supplements similar to yours,  you may find that running ads on pilates mats or dumbbells or exercise clothing is 1) cheaper 2) less competitive and 3) better converting. 

How Sellozo Can Help Automate Your PPC To Make Life Easier For You

At Sellozo, we aren’t just a PPC software company (although that certainly is the driving factor behind our loyal customer base). Sellozo recognizes that advertising is only as powerful as your strategy, willingness to be creative, having a quality product, and having an optimized listing. As such, our team is ready to help you set up your Amazon storefront for success by factoring in all of these components. 

We understand the struggle Amazon Sellers are faced with on  a day-to-day basis and recognize that growing costs of manufacturing, shipping, storage, Amazon fees, and PPC is beyond the scope of a one-person operation. This is why we are so proud of our proprietary, user-friendly PPC Tool. 

Our platform offers Amazon sellers the ability to simplify their Amazon ad campaigns by fully automating and optimizing each campaign to help them save time and money. Sellozo customers have experienced many benefits from using the platform including:

  • 28% increase in profit on average
  • Lowered ACoS
  • Less time spent on manually adjusting bids
  • Automatic blacklisting of negative keywords
  • and much more!

For more on all the features, the Sellozo tool offers, check out this blog.

Want to learn more? Schedule a complimentary demo.

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