How Much Does Amazon Advertising Cost?
July 25, 2023
Since the onset of the COVID-19 pandemic, selling on Amazon has skyrocketed, and in 2021, around 2,975 new sellers joined the platform every day. And with Amazon continuing to dominate the global retail market in 2023, businesses are increasingly turning to Amazon Advertising to boost visibility, drive sales, and ultimately, increase profitability. But a question that's commonly asked by those venturing into this advertising platform is: how much does Amazon advertising cost? The answer isn't straightforward, as costs can vary widely depending on several factors.
In the following article, we're going to take a closer look at different types of Amazon Advertising, their cost structures, and how you can optimise your advertising strategy to get the most bang for your buck. Let’s take a look!
Types of Amazon Advertising
Depending on your Amazon advertising strategy and budget, you should choose the tactic that will bring the best ROI for your business.
- Sponsored Products: This pay-per-click (PPC) advertising option allows you to promote individual product listings, making them more visible to shoppers searching for related keywords. It's widely used due to its direct impact on product visibility and sales
- Sponsored Brands: Targeted towards registered brand owners, Sponsored Brands allow you to advertise a collection of products, enhancing brand visibility and customer discovery
- Sponsored Display: These are display ads that reach audiences on and off Amazon, regardless of whether they've searched for your product. They're a powerful tool for extending reach and improving product visibility
- Amazon DSP: Amazon's Demand Side Platform (DSP) offers programmatic advertising solutions to advertisers looking for advanced targeting options and greater reach across the web
Pay-Per-Click (PPC) Advertising on Amazon
Understanding Amazon's PPC model is critical in estimating advertising costs. With PPC, you only pay when a shopper clicks on your ad: this model can provide excellent return on investment (ROI) as you are essentially paying for direct engagement with potential customers.
The cost per click (CPC) can vary significantly based on competition, relevance, and the quality of your ad. On average, advertisers can expect to pay between £0.20 to £3.00 per click for Sponsored Products and between £0.10 to £2.00 for Sponsored Brands, although these figures can fluctuate.
Cost-Per-Click (CPC) vs. Cost-Per-Impression (CPM)
While CPC is the cost you pay for each click on your ad, Cost-Per-Impression (CPM) refers to the cost you pay for a thousand views of your ad. CPM is the model used in Amazon's display ads and DSP campaigns, so it's important to understand the difference - the costs and potential returns of these models can differ.
Amazon Advertising Auction System
The cost of Amazon advertising is not fixed, but is determined through a real-time auction that takes place every time a user performs a search. In this system, advertisers bid on keywords relevant to their products. The highest bid, in conjunction with ad relevance and performance history, determines whose ad is shown.
It's worth noting that the winning advertiser is not charged their bid price but a penny more than the second-highest bid; this means that while bidding high might increase your chances of winning, it doesn't necessarily correlate to higher advertising costs. Understanding this system is crucial to optimise your Amazon advertising costs.
Factors Affecting Amazon Advertising Costs
Several factors can influence your Amazon advertising costs. Here are some of the most noteworthy:
- Keyword Competition: High-demand keywords can drive up costs due to the increased competition for ad placement
- Product Category: Some product categories are more competitive than others, leading to higher advertising costs
- Seasonality: Certain times of the year, like the holiday season, see increased competition and, consequently, higher ad costs
- Ad Quality: Amazon looks at your ad's relevance and performance history when determining ad placements. Better performing ads can often win over higher bids
- Your Bid: Higher bids can increase your chances of ad placements but can also result in higher costs
Advertising Cost Optimisation Techniques
Managing Amazon advertising costs effectively requires strategic planning and continuous optimisation. Here are some key techniques:
- Targeting the Right Keywords to Maximise ROI: Long-tail keywords (keywords with three or more words) often have less competition and a higher purchase intent, leading to lower costs and higher ROI. Make use of Amazon's keyword tools or third-party platforms to identify these keywords - you can also use the help of an Amazon advertising agency to help you find profitable keywords with high search volume and low competition.
- Optimising Ad Copy and Creative to Improve Click-Through Rates (CTRs): High-quality ad copy and images can significantly increase your CTR, leading to better ad performance and potentially lower costs. Ensure your ads are compelling and accurately represent your product.
- Monitoring and Adjusting Bids: Regularly review your ad performance and adjust your bids accordingly. This proactive approach can help you stay within budget while maximising ad placements.
Like any ad campaign, Amazon advertising should not be a set-it-and-forget-it endeavour: to keep up with trends, competitors, and seasonal popularity, you’ll need to be consistently monitoring, testing, and tweaking your ad strategies - this is critical to getting the most out of your ad budget.
The Bottom Line
The cost of Amazon advertising is not a one-size-fits-all figure, with many factors coming into play. From the types of ads you choose and the competitiveness of your product category to the keywords you bid on and the quality of your ads, all these elements collectively determine your Amazon advertising costs.
However, the question 'how much does Amazon advertising cost?' should not be seen as a deterrent but rather as a strategic consideration. Amazon's advertising platform offers an array of flexible and scalable options to fit various budgets and business objectives, and what's more, it provides an opportunity for your products to be discovered by millions of potential customers, making it an investment worth considering.