amazon ppc advertising auction how it works

How does the Amazon PPC Auction work?

Bidding is likely the most crucial factor in determining whether your Amazon advertising efforts succeed or fail. Even the most strategically structured campaigns with highly relevant targets have the potential to underperform. That’s because it’s not a flawless system, and understanding what buyers want, where they want it, and why they want it is difficult to do… no matter how much target-marketing research you perform.

Consider the case of bubble wrap. Originally, the famed insulator (and arguably the most fun poking device for kids ever) was intended to be used as wallpaper. Yes, you read that correctly. Wallpaper. Obviously, it wasn’t successful as a wallpaper brand and they revamped it to work as packaging protectant, but you get the point. Because you never know what your customers will think, feel, or do in response to your offering, having an effective and unique campaign bidding strategy is critical.

You’re more likely to miss out on crucial placements and chances if your bids are too low. If you set your bids too high, you’ll likely get too much traffic for too little money, resulting in major inefficiencies.

Understanding how Amazon bidding works in depth will help you create winning campaigns that meet your business objectives.

How Does Amazon Keyword Bidding Work?

When a shopper searches for products on Amazon, Amazon conducts a real-time CPC auction to choose (a) which advertising to serve, if any, and (b) in what order.

The highest bidder in most CPC auctions pays only $0.01 more than the second-highest bidder, according to typical Second-Price Auction guidelines.

However, Amazon utilizes an upgraded Second-Price Auction, which picks and ranks eligible advertising by analyzing both the target-level price and relevancy to the matched query (projected to be measured using expected CTR and conversion rates – though these details are kept under wraps).

As a result, the auction winner may not need to spend the maximum to obtain first place because relevance can introduce a discount element.

Why should you utilize Amazon’s pay-per-click (PPC) service?

When people hear the word Amazon, they don’t immediately think of advertising. However, the retail juggernaut has grown into a monster in the advertising market over time. Amazon’s advertising income reached $5.4 billion in the third quarter of 2020, up 51% from 2021. While Amazon has not yet dethroned Google or Facebook, it has increased its market share significantly.

So, why are people flocking to Amazon PPC, particularly sellers?

The solution is straightforward: return on investment (ROI). Users entering a search query on Amazon are already wanting to buy a product because it is a retail platform. They are purchasers who are actively looking to make a purchase. When a buyer is already looking for a product, your ads are more likely to convert.

The user base is also growing all the time. This is especially true for the year 2022. Customers went to internet retail to buy goods and fulfil their shopping needs after most retail businesses had to close.

As a result, Amazon has a captive client base that appears to be growing in size every year. You’re aiming for that demographic with Amazon PPC. When a PPC campaign is properly conducted, money can be made easily.

When should I start running Amazon PPC advertisements?

This is a common concern among first-time sellers. When is the best moment to start a pay-per-click campaign? Regrettably, there isn’t a definitive answer. As soon as you create a new listing, we recommend initiating Amazon PPC ads.

You’ll need data to construct an effective PPC campaign. You must launch your campaigns as soon as possible in order to obtain actionable data. Because the optimization process is iterative, you must stay the course in order to achieve positive results. It’s also challenging to obtain attention early in the product life cycle, and Amazon PPC can help with that.

What Is Amazon Paid Search and How Does It Work?

Here’s how Amazon’s paid search works in a nutshell. It’s not as difficult as it appears. Every month, millions of searches are made on the Amazon Marketplace. These range in length from brief phrases to long phrases (or what we call long-tail keywords). These customers are people who are looking to buy something.

Recognize that potential customers will never buy on Amazon for the sake of window shopping. They aren’t there to come up with new ideas. They’re all set to make a purchase. All they have to do is go to Amazon and type in the product name they wish to purchase.

As a result, Amazon retrieves a list of products that it believes will meet the customer’s requirements. This list of items is now referred to as “organic” results.

There is, however, something known as “paid” search results. No matter what you search for, these appear above the organic results. Though they are usually found above the organic search results, they can also be found in between them, on the right side, or below them.

Types Of Amazon Ads

Sponsored Brand Ads, Sponsored Display Ads, and Sponsored Product Ads are the three forms of Amazon Ads. Let’s find out more about them right now!

Sponsored brand advertisements, often known as “headline search ads,” are generally for top-of-the-funnel consumers, offering your product the opportunity to capture a customer’s attention before they know exactly what they want.

On desktop computers, Sponsored Brand ads appear in the following places:

  • Above search results, thus the moniker “headline search.”
  • Immediately to the left of the search results
  • Below the search results.

Because of their capacity to display several items, you may market complimentary products side by side.

Sponsored Brand Ads are excellent for capturing the attention of buyers in a variety of ways. This ad type also comes in a number of formats, including Sponsored Brands Video for more eye-catching appeal.

To create Sponsored Product advertising, just choose a product, a keyword term, and a budget. When you do this, Amazon will automatically target your sponsored advertising to a relevant audience.

According to research, several businesses have reported more sales with Amazon Sponsored Product advertisements than with Google Ads. Furthermore, they are three times less expensive than Google’s CPCs.

Display Ads Sponsored By Amazon

Amazon Sponsored Display Ads are excellent for increasing impressions, generating upper-funnel attention, and retargeting interested consumers to clinch transactions.

Amazon Sponsored Display Ads can be seen in the following places:

  • Customer Review Pages 
  • Product Detail Pages on Desktop and Mobile
  • Top of the Offer Listing Pages

Sponsored Display can re-target buyers who have recently visited your Amazon product pages, your competitors’ product pages, or searched for terms related to your listing.

Sponsored Display Ads offer the distinct benefit of being able to be displayed both on and off Amazon, enhancing re-targeting options.

Amazon Product Advertisements

Sponsored Product Ads highlight your items on product detail pages and in search results. Companies have boosted their spending on Sponsored Product advertisements since they offer excellent customer attraction and conversion capabilities.

This like other Amazon PPC advertising choices, only costs you when a shopper clicks on your Sponsored Product Ads. This tool gives your company control over its advertising budget and keyword bidding.

Sponsored Product Ads can be found in the following places:

  • Among the search results
  • On the right side of the search results page
  • At the bottom of the list of search results
  • On product information pages

The Sponsored Product Ad type is by far the most common on Amazon PPC, and it occurs at every stage of the buyer experience.

This is the greatest Amazon ad type for newcomers, and it should account for the bulk of your Amazon Advertising expenditure even when you grow into Sponsored Brand and Sponsored Display.

Requirements To Run A PPC Ad

Before you start operating a PPC ad campaign on Amazon, make sure you fulfill the following requirements.

  • Seller Account: Every advertiser should have a seller account.
  • Shipping: Every advertiser should be able to send products to any location.
  • Buy Box: If you want to use Sponsored Products to promote your products, you must meet the Buy Box eligibility criteria, which includes things like having a professional seller account, showing metrics (for cancellation rates, order defect rates, late shipment rates, and so on), and stock availability.
  • Amazon Brand Registry : The fundamental goal of the Amazon brand registry is to protect intellectual property while also providing a better user experience.

Factors affecting ad placements on Amazon PPC

Now that you’ve learned about the many sorts of Amazon PPC advertisements, it’s time to learn about ad placement. The majority of people believe that the highest bidder always gets the greatest place, however this isn’t always true. While the cost-per-click is important, it isn’t the only thing to consider.

The following are the two most important criteria that influence ad placement:

  • Amazon CPC: The person with the highest CPC has a better chance of acquiring prime ad space.
  • Quality factor: The likelihood of a buyer clicking on the advertisement is also important. Amazon is only compensated for clicks when you use Amazon PPC. Amazon doesn’t benefit from first impressions. The better an ad’s placement, the more likely a customer is to click on it.

You may afford to bid lower for an ad spot if you have a successful ad that converts well and generates clicks. When it comes to Amazon PPC, having a decent product listing and ad wording is crucial for lowering ACoS (advertising cost of sale) and increasing ROI (return on investment).

What Is ACoS ?

ACoS is a statistic that is used to test the efficiency of your Amazon PPC campaign. It is the ratio of ad spend to ad revenue. It basically calculates how much you spend for every dollar of income earned.

ACoS = (ad spend * 100) / advertising revenue

If your ACoS is more than 100, it suggests you are spending more money than you are bringing in.

There is no magic number that can be used to evaluate a campaign. The optimum ACoS is determined by a variety of criteria, including but not limited to product category, company strategy, and advertising objectives. All of these aspects will need you to adjust your ACoS goals and design ways to reach your aim.

How Do Amazon Keywords And Match Types Work ?

When launching an ad campaign, you must select the keywords for which you wish to bid. Keywords might consist of more than one word. Then, if a client’s search phrase matches your keyword, your ad qualifies to appear in the search results in front of the consumer.

You must also pick a match type for each term you select. The match type relates to how well your term matches the user’s real Amazon search.

Broad Keyword Match

Search phrases that are not only relevant to your search but also match it. Your ad may appear regardless of the order of the keywords, as well as for extra terms. Synonyms, misspellings, and variants of your term may be included.

Broad Keyword Match Advantages and Disadvantages:

Broad match looks for a wide variety of search phrases, including abbreviations, acronyms, and synonyms:

  • As customers may use a larger mix of search phrases to activate your ad, this typically implies better exposure and sessions for these keywords.
  • Broad match may be incredibly expensive and deplete your funds by soliciting clicks from unrelated adverts and search phrases, as seen in the example above.
  • Broad match is an excellent technique to reach more individuals and increase the exposure of your listing.
  • You may conduct a wide keyword campaign for a set length of time, then evaluate the data and fine-tune the keywords based on the search terms.

Phrase Match

The phrase match is used when you specify a phrase and the keywords are matched with terms before or after the phrase. The ability to adjust the word order is a fundamental element of phrase match. Misspellings, singulars and plurals, stemming, and other variations are possible.

Example : swimming shorts, swim wear, abbreviations, and acronyms are all examples.

Advantages and Disadvantages of Amazon Phrase Match Type:

The ad is displayed only when the search phrase matches the keyword, however other words can be inserted before or after the keyword.

  • The ad’s target audience is in the middle range and can be triggered by both short and broad search phrases.
  • You still have excellent visibility for your goods, but you save a few unwanted clicks that would have occurred in the case of a wide term match.
  • This is a decent compromise between wide and specific match because you have a little more control over when your ad appears.

Exact Match

You may narrow it down to people who are specifically looking for your goods by using an exact keyword match. Precise match targeting restricts your ad to only your exact term (includes plurals, singulars, and misspellings).

Advantages and Disadvantages of Amazon Exact Match:

  • The ad’s target audience is limited yet highly specific.
  • Precise Match reduces the amount of impressions compared to other ad options since the ad is shown to users who input the exact search phrase as your keyword.
  • Exact match is an excellent approach to ensure that you receive the appropriate clicks and target the people who are specifically looking for your goods.

Negative Keywords

If keywords are search terms where you want to appear, negative keywords are search terms where you don’t want to appear. 

Negative keywords aid in avoiding ad spend being wasted on irrelevant or unproductive search inquiries. Amazon’s algorithm will only show your goods for relevant searches, so don’t worry about adding every bad phrase you can think of.

There are just two match kinds for negative keywords: phrase and precise. These function similarly to phrase match and exact match keyword targeting.

There is a third form of negative, in addition to these two: negative ASINs or negative product targeting. Negative product targeting is a type of negative exact that lets you to specify which ASINs or brand names you do not want your product to show for.

Is Amazon PPC Worth It?

What makes Amazon unique is that they already have visitors. Why would you start with a non-Amazon site to try to generate traffic when Amazon is already where the consumers are?

Furthermore, when accessing the eCommerce site, Amazon visitors are prepared to make a purchase. According to Bloomreach, 55% of shoppers begin their search for a product on Amazon before completing a purchase. Every month, Amazon receives over 2.3 billion visits.

All you need to do is get their attention.

Surprisingly, advertisers are only now recognizing the value of Amazon Advertising.

The following are the most prevalent reasons why sellers and vendors execute PPC ads for their items.

To Increase Product Sales
One of the simplest strategies to increase sales is to run PPC advertising. Of course, increasing sales is the long-term goal of all sellers who conduct PPC ads for their items.

Improves the organic rankings of highly competitive keywords
Your listing may contain terms that are too competitive to rank in an organic search. Running PPC advertisements for such keywords aids in increasing exposure. Having a first-page result for such keywords not only promotes sales but also increases your product’s organic rating for the keyword over time.

In order to raise brand awareness for new product launches
Products with the greatest sales appear at the top of the search results. It is quite tough for new items to rank high for keywords. Sales are reduced when a company’s ranking is low. Running PPC ads is an excellent way to boost the product’s visibility and sales potential.

To keep competitors from stealing top positions and sales
Over time, the number of vendors in best-selling niches and categories reaches saturation. Even if your product ranks high in organic searches and has attractive offers, competitors running PPC advertising for their items may simply outpace it. Most top-ranking companies use PPC campaigns to protect and maintain their top rankings and positions in Amazon searches over competitors who also use PPC.

To Increase Product Visibility For Seasonal Trends
Amazon Sellers notice the most and highest sales throughout seasonal trends such as Christmas, Mother’s Day, Halloween, and so on. The same is true for end-of-season sales in the fourth quarter. Depending on the product, Amazon Ads can be an excellent approach to increase sales by raising customer interest due to seasonality.

What Are Amazon Bidding Strategies for Campaigns and How Do They Work?

Advertisers can choose between three Campaign Bidding Strategies at the campaign level for Sponsored Products and Sponsored Display campaigns, in addition to keyword and product target-level bids.

Dynamic Bids – Down Only  | If a click is less likely to convert, Amazon will lower your bid by up to 100%.

If a click is less likely to convert, Amazon will lower your bid by up to 100%. This is our suggested campaign bidding approach since it keeps your bid as the highest cost-per-click in line with your campaign’s or ad group’s efficiency aim.

Dynamic Bids – Up and Down | If a click is more likely to convert, Amazon will raise your bid by up to 100%, and if a click is less likely to convert, Amazon will lower your bid by up to 100%. Amazon will not increase bids for Sponsored Products by more than 100% for Top of Search placements and more than 50% for Product Page and Other placements.

While we highly encourage everyone to analyze the success of this method for their specific needs, we do not often endorse this campaign bidding strategy because it increases expense and inefficiencies.

Fixed Bids | Depending on the likelihood of a conversion, Amazon will not alter your bid dynamically.

We don’t usually promote this campaign bidding technique because Amazon can reduce your bid dynamically if it’s less likely to convert, which can save you money and time. While Amazon is currently gathering data, advertisers may use this to launch new campaigns.


Bids should be changed at the very least whenever one of the key inputs changes substantially (i.e. average order value, conversion rate, etc.).

The problem for anyone selling on Amazon is that this happens on a daily basis, making it incredibly difficult to manually control bids while simultaneously maximizing every other aspect of an account. In order to operate successful advertising campaigns, machine learning, automation, and Amazon keyword bidding tools are required.