Maximizing ROI: the pros and cons of running Amazon PPC campaigns

Amazon pay-per-click (PPC) campaigns are an effective way for businesses to reach millions of potential customers who shop on the platform every day. PPC ads on Amazon enable advertisers to increase visibility and engage directly with motivated customers. But does the investment deliver the expected returns, or is your hard-earned marketing budget better spent elsewhere?

In this article, we explore the pros and cons of Amazon PPC advertising. We’ll look beyond Amazon’s promotional material and success stories to learn how you can best use Amazon’s PPC ad platform to deliver sustainable success, including how to create Sponsored Products, Sponsored Brand, and Sponsored Display ads that cut through and connect with customers.

Understanding Amazon PPC advertising

Amazon offers advertisers three choices when it comes to creating a PPC campaign: Sponsored Products, Sponsored Brands, and Sponsored Display ads.

1. Sponsored Products are the most common type of PPC ad to promote individual product listings. Your product will show up in search results, appearing alongside organic results. The system uses product details and keywords to help filter results. Products displayed through PPC are clearly marked as ‘Sponsored.’
2. Sponsored Brands is a way to promote a whole range of products or brands. You’ll see ads displayed with custom headlines, logos, products and videos that are displayed during the discovery and consideration phases of the customer journey. Sponsored Brands can help drive traffic to your store or product pages.
3. Sponsored Display ads run across Amazon channels as well as appearing across the internet (through retargeting). You can promote individual products or brands.

Amazon Ads provides marketers with detailed campaign metrics they can use to analyse performance. Data points include ACoS (Advertising Cost of Sale), CPC (Cost Per Click), and impressions—as well as details on total spend and customer orders. You can access these in real-time, enabling marketers to stay in touch and in control of campaigns.

Most product sellers favor Sponsored Products. These show up in normal results and use the standard Amazon product description – which means they’re easier to create and configure than Sponsored Brands and Sponsored Display ads.

You identify your keywords, set your budget, and how you want to target your customers (manually or automatically). You can do this through the Amazon platform or through a third-party platform like Channable.

Advantages of Amazon PPC campaigns

Amazon PPC campaigns enable advertisers to take advantage of the platform's reach and trust. Sophisticated targeting features optimize spending, and its one-click purchasing makes selling transactions take a few seconds.

Here are some of the advantages of Amazon PPC campaigns.

Increased visibility and product exposure

Amazon has around 2.5bn visitors per month. The average US customer places 72 orders a year, spending over $2,000 on the platform. Whether you’re selling books to bathroom taps, you can buy (almost) anything on Amazon.

Amazon PPC enables advertisers and product sellers to tap into the world’s largest market of motivated buyers. The increased visibility and product exposure are highly powerful.

Customers who visit Amazon are already in a buying mindset. When promoting your products on Amazon – through sponsored ads or brands – you’re connecting lower in the funnel. This means customers are much more likely to purchase than, for example, through Google Shopping.

Amazon's credibility and trust

As well as being one of the world’s most popular places to shop, customers trust the brand. One survey found that 72% of shoppers trust Amazon, something that advertisers can enjoy. Amazon’s product reviews add validation for customers, giving them the confidence to buy – which can lead to increased sales.

Automated and manual targeting solutions

Amazon offers marketers the ability to set up automatic or manual targeting options. Automatic targeting enables Amazon to identify your core customers and serve relevant ads using four criteria (Close match, Loose match, Substitutes, and Complements).

Alternatively, you can build your own campaigns and focus on your customers using manual targeting. This gives you greater control, but you’ll need to ensure you have the technical skills and audience insights to create campaigns that engage your market.

If you’re already selling on Amazon, then using PPC can take a few minutes to set up. The platform makes it easy for sellers to set a budget, identify a target audience and start selling (and spending).

Of course, you’ll need to spend time optimizing your campaign, improving product descriptions, and incorporating keywords – but you can do this at the same time as selling products.

Increased conversion rates

Evidence shows that Amazon PPC delivers more conversions than other product promotional marketing. The ability to directly target customers ready to buy can have a massive impact on success. Amazon PPC conversion rates are much higher than Google Shopping

Why? Google Shopping operates primarily as a price comparison platform, whereas Amazon is an online marketplace where customers are ready to buy. Amazon simplifies the process, with one-click purchases ensuring transactions can take seconds. Google Shopping, on the other hand, requires a much longer purchase process.

Amazon PPC and Google Ads have their place in a digital marketing strategy. It’s important to understand the pros and cons of each platform and where they fit into the customer purchase process.

Amazon PPC Campaign: Potential Challenges and Disadvantages

Amazon ads are effective, but there are some issues – including high costs, increased competition, and a reliance upon an ever-changing algorithm.

High advertising costs

Amazon PPC ads are not cheap – and high advertising costs could rapidly deplete your marketing budget without boosting sales.

In the last quarter of 2024, Amazon made over $14bn through its advertising operations. While this reflects the scale of operations, it also highlights how profitable it is for Amazon – money it’s making from marketers.

Advertisers can use Amazon’s campaign metrics to monitor and manage campaigns, as well as staying in control of budgets. Some of the key data points to monitor include ACoS (Advertising Cost of Sale), CPC (Cost Per Click), impressions, total spend, and customer order value.

Staying on top of data can give you an accurate picture of whether your advertising spend is increasing sales.

Low barriers to entry = high competition

Amazon makes it easy to sell on its platform. While removing barriers to entry is positive, it also increases the likelihood of competition and bidding wars – where sellers pay higher PPC prices to generate a sale.

Advertisers can choose to stick with their bid strategy and lose sales or eat into margins by paying higher prices to secure a position for sponsored ads.

Amazon offers sellers a fix with its Dynamic Bidding Strategies solution. By enabling this feature, Amazon can increase PPC spend to capture a sale. There are no guarantees of success, and you could end up with similar sales results and an even bigger bill. (For full transparency, Amazon’s DBS solution does enable advertisers to lower PPC costs when competition is lower.)

Advertisers depend on Amazon's algorithm

Advertisers on Amazon have to rely on its algorithm to place ads – and it’s not foolproof. Some industry experts have criticized Amazon for lack of transparency–especially around its factors to secure the Buy Box–in comparison to Google Shopping, for example.

Automatic targeting, too, can lead to issues and errors in product placement. Amazon can decide to show your product next to similar products (a sleeping bag next to a tent, for example), but this may not always work effectively and could result in your ads being shown to customers who aren’t interested in your products.

The Amazon algorithm is constantly being developed and refined, which has both positive and negative effects on advertisers. We’re currently on A10, and future changes are inevitable.

After algorithm updates, you may find that organic and paid-for positions can change as the algorithm learns and improves. The Amazon algorithm is, as you’d expect, a closely guarded secret and while sticking to the fundamentals of writing accurate descriptions, incorporating keywords, and investing in learning how to best use the features of the Amazon Advertising platform are critical, they don’t guarantee success.

Key strategies for Amazon PPC success

Advertising on Amazon is a complex process that demands more than paying for a prominent position. To maximize ROI and increase conversions, you should follow our tips on advertising your products on Amazon and improve every aspect of your customer offer.

• Conducting thorough keyword research – Keywords are critical to customer targeting through the Amazon PPC system. The most successful campaigns use a range of keywords, including product names and keyphrases that reflect search intent. While Amazon can use its automatic targeting to help you, manual targeting can be more effective.
• Optimize product listings for conversions – PPC ads can drive clicks, but they don’t guarantee customers. Your product listings should be clear, accurate and engaging – giving customers the confidence to make a purchase. The process never really ends, with testing and iterating ad creatives and copying key parts of every Amazon marketer's role.
• Monitor and adjust campaigns regularly – When creating campaigns, you should set realistic campaign goals and benchmarks – and monitor them. Tracking and analyzing campaign performance metrics and using these insights to improve campaigns is essential.
• Utilize Amazon's advertising tools effectively – Amazon Advertising enables customers to optimize campaigns. For example, implementing retargeting strategies to reach potential customers can be highly effective. The Amazon platform is constantly changing, reflecting the changing nature of ecommerce. One recent development is the increasing integration of video ads into the platform.

Powering growth with Amazon PPC

Despite the challenges of advertising on its platform, Amazon PPC is one of the most effective and successful ways of selling products to a global audience. Marketers must ensure they optimize product descriptions and are up-to-date with developments in the Amazon algorithm and advertising platform to take advantage of emerging opportunities.

Amazon Ads is part of Channable's end-to-end marketplace solution, making it even easier for advertisers to access the benefits of Amazon PPC adverts. Learn how Channable can optimize and accelerate your Amazon PPC campaigns and how you can manage thousands of ads across marketplaces. Sign up for a free trial today!