Advertising on Amazon: Costs, Fees and Strategy

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Amazon advertising is a great way to increase ecommerce sales, increase brand awareness and gain valuable insight into customers’ changing tastes and habits. As the largest ecommerce platform in the world, Amazon sellers often have a love/hate relationship with the site; it’s a game you have to play to be successful, but you’re always playing by the house rules.

Whether you’re learning how to advertise on Amazon or looking to improve important PPC metrics like return on ad spend, this is a handy guide to Amazon for retailers.

Why Advertise on Amazon?

Amazon.com has more than 300 million active users and 9.5 million sellers worldwide. For ecommerce brands, the site is an excellent sales channel alongside their website, Google Shopping and other online selling portals. For customers, it may be their only sales channel. 61% of all online shoppers start shopping on Amazon and 90% of online shoppers price-check purchases on the site even if they finish the transaction somewhere else.

The Role of Third-Party Sellers on Amazon

That’s you. Third-party sellers are independent merchants that agree to Amazon’s terms and conditions and pay fees. Selling on Amazon costs $39.99 a month plus fees based on total product revenue, shipping and other optional costs associated with third-party sales. In exchange, brands have access to the millions of daily active users on Amazon.

Third-party sellers account for more than 50% of Amazon’s revenue, which means merchants that make money on Amazon also make Amazon a lot of money.

How to Advertise on Amazon

Creating a store on Amazon is just the start. Once a store is set up, merchants can create different types of ads on Amazon. These ads are served as a part of the Amazon Display Advertising network and function a lot like Google’s display network in fee structure and ad formats.

Amazon DSP (Demand Side Platform) examples include:

Amazon Sponsored Products – This is the most common Amazon ad type and appears as a standard product listing on the search results page. These are pay-per-click and are targeted based on keywords chosen by the advertising brand (that’s you!).

Sponsored Brand Campaigns – Brand campaigns are similar to sponsored product ads but include multiple products from a single Amazon store. Instead of pointing users to a specific product page, Brand Campaigns link to either a customized product or collection page on the seller’s Amazon store.

Amazon Product Display Ads – Display ads are designed to cross-sell or upsell customers by highlighting similar products that are often purchased together. Display ads are available to all advertisers; you don’t have to have an Amazon store to use this type of ad. Display ads are served on individual product pages, customer reviews and on search result pages. Depending on your ad set-up, they are also served on Amazon email marketing pieces.

Video Ads – Video ads are served on Amazon.com and Amazon devices like Kindles and Fire TVs. Like display ads, you don’t have to be an Amazon seller to tap into video ads.

Amazon Native Ads – Native advertising on your own site may seem counterintuitive, but native ads use Amazon shopping data to serve personalized products to users on your site in real-time.

Choosing the right mix of ad types, creating engaging graphics and copy, and managing your monthly budget is a full-time gig. Our PPC team can take paid advertising off your to-do list.

Amazon Advertising Fees: How Much Is This Going to Cost Us, Bezos?

No matter what ad type you select, there are no monthly Amazon advertising charges, though you do need to pay the aforementioned $39.99 per month for your seller account. The price you pay per click will change based on how many competing vendors have placed bids on that keyword or keyword group.

The expenses aren’t restricted solely to advertising. Costs like fulfillment fees, referral fees or selling plans increase or decrease profit margin before factoring in ad spend. For most merchants, Amazon advertising fees are an additional expense baked into the cost of doing business on the largest retail platform in human history.

How to Use Amazon Advertising In Tandem with Google

Many sellers use Amazon as a second sales channel to complement their ecommerce website. In most cases, third-party vendors have better product margins when customers convert on the brand’s own website compared to buying on the brand’s Amazon storefront.

If your average profit margin is higher on your own domain, it may be best to use Amazon ads to increase total brand awareness. Amazon recommends using video and display ads to achieve this goal.

Amazon vs. Google Advertising Spend

Think of your Amazon and Google advertising efforts as two levers you can pull as a marketer. As spend on one channel increases, it may need to decrease on the other. Prioritize spend based on a few core metrics:

Return On Ad Spend – How much do you get back for every dollar spent? Optimizing your ROAS is a smart way to make the most of your ad budget; invest more on the channel that consistently offers the highest return.

Average Cart Value – Many PPC agencies miss this one. Customers on Amazon and Google could represent very different audiences based on the data used to serve the ad. In some cases, one channel might see increased value per transaction that makes each conversion on that channel incrementally more valuable over time.

Cost Per Click – It’s the heart of digital advertising and while there are a lot of other variables, CPC doesn’t lie.

Test, Test, Test Your Ads

You’ll never truly know which platform is more valuable to your brand without doing the dirty work. Test different types of ads in different locations on both platforms over time to experiment with various budget allocations. There are always ways to get more out of your marketing budget!

The Best Way to Advertise on Amazon is to Advertise Everywhere

As valuable as Amazon is to sellers, there are several drawbacks for vendors who make it their main sales channel.

Highly Competitive – With nearly 10 million sellers, Amazon is intensively competitive, and it can be difficult for new brands to compete. There may be thousands of sellers carrying a specific product at nearly identical prices. Most customers won’t scroll far enough to see vendors outside the top five product results, let alone the top 500.

Fees – There are different fees associated with selling products in different categories. Combined with fulfillment fees per item and monthly storage costs (if you use Amazon Fulfillment Services), your profit margin can shrink quickly.

Channel Management – Selling on another channel means you’ll spend additional time managing sales and shipments in that space. Adding another paid platform is yet another management piece that takes away from running other business operations.

Whose Data Is It, Anyway? – As a seller and advertiser, you’re compiling data on your customers and products. As a seller on Amazon, you’re compiling that data and putting it in Bezos’ pocket. And Amazon might thank you by using your data to develop its own products.

Take a Peek at All Your PPC Options

Amazon is a playground retailers love to play on, but it isn’t the only option. Our dedicated paid media team can help you find the perfect balance of paid channels and make it all work alongside your other digital marketing efforts. Get in touch or call 231-922-9977 and let’s get started!

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