Amazon Advertising: The Ultimate Guide 2021 – Ad Strategy, Tips & Examples

Amazon Advertising is booming. It’s attracting more and more advertisers every day. Half of everything purchased on the internet in the United States is purchased on Amazon. So, it’s no wonder that most shoppers begin their product search on the platform. 

The shift away from Google as the all-purpose search engine happened relatively recently, in 2018. Amazon has the best price, selection, and fastest shipping – so, users simply started going directly to the platform they believe they’ll end up.

The opportunity to advertise on Amazon is therefore one that can’t be overlooked by any brand owner. In this complete Amazon advertising guide we will show you how Amazon Ads work:

1. Which ad types exist in Amazon Advertising

2. What are tactics and use cases for each ad type

3. How to combine the different ad types in a coherent Amazon Advertising strategy?

4. If you’re already selling on Amazon – have a look at our free Benchmarker and learn how you can benefit from it

Amazon Advertising: A Bird’s Eye View

The many formats of Amazon Advertising offer a solution for every point in the Marketing Funnel and can be broken down into 2 big categories:

1. Amazon Advertising on Amazon a.k.a. Amazon PPC

2. Amazon Advertising on & off Amazon a.k.a. Amazon Demand Side Platform (Amazon DSP)

In each of these categories there is a variety of ad types:

Comparison of self-service and managed-service solutions on & off Amazon

Why Advertise on Amazon?

Amazon Advertising is all but a necessity for brands who want to sell well on the platform. For 20 years, Amazon has been quietly building the most robust set of consumer purchase behavior data – ever.

As far as purchasing behavior goes, Amazon is becoming a master at knowing who, what, when, at what price, and why (or why not):

1. Amazon uses a Collaborative Filtering Engine to group consumers into detailed profiles, giving them the power to predict and then influence buying behavior.

2. Amazon credits 35% of their sales to this strategic and carefully crafted power of suggestion. So aggregating consumer data isn’t new, but the efficacy with which Amazon is using it is. 

3. Amazon Advertising is leveraging this resource to expand its offering to ads outside of the platform. It should be no surprise that it is already the 3rd largest ad business in the world behind Facebook and Google.

So, the reason that Amazon is a perfect buying machine is because it was engineered with the right data. And while the tech giants are currently enjoying a comfortable lead, it likely won’t last for long considering Amazon Advertising’s rapid growth.

PART 1: Amazon Advertising a.k.a. Amazon PPC

This type of advertising is for products and brands on Amazon:

• Sponsored Products

• Sponsored Brands

Q: Who can buy Amazon PPC ads?

A: Amazon Vendors and Sellers who sell from eligible categories (not including adult products, used products or products in closed categories) and whose products are Buy Box eligible. These ads are “self-service solutions” that can be managed through Seller Central (for sellers) or the Amazon Advertising Console (for vendors).

Q: How much does it cost?

A: Ads are sold by click, which is why they are called Amazon PPC (Pay-Per-Click ads). This is Amazon’s version of Google Adwords.

Q: What are the common Amazon advertising challenges?

A:

1. Brands have to own the Buy Box to run them. It wouldn’t make sense, after all, to pay to send users to a checkout page for a competing seller.

2. Seller Central is not the most intuitive platform. While Amazon is working slowly at integrating more user friendly features, it’s safe to say this is not their utmost priority. Remember: Amazon is a platform for buyers first.

3. Ultimately, to know whether your Amazon ads are working and worth it, your brand needs a crystal clear view of what your profits are. And, Seller Central can’t tell you that, because Amazon doesn’t know your variable COGS (nor would you want them to).

4. Let’s say that your Amazon ads goals are to decrease ACoS, or to increase sales, or to increase profits. Without an understanding of profit and a finely-tuned ACoS, brands risk overspending on PPC, making it an expense chipping away at profit margin instead of bringing back a strong return on investment.

5. Another risk is an unoptimized keyword strategy. Could your brand be wasting money bidding on keywords which are not converting? Is your brand creating redundancies in Amazon advertising campaigns?

In short, it’s not enough just to use Amazon advertising a.k.a PPC. You have to use these ads well – by targeting the most profitable keywords and constantly improving upon them. Even once you establish a solid PPC technique that is bringing you closer to achieving your goals, your Amazon listings don’t exist in a silo: 

Changes to external factors like competitors, market shifts, and seasonality will keep you on your toes.

1.1. Amazon Advertising: Sponsored Products (Ads)

You can’t talk about Amazon PPC without having a basic understanding of Amazon SEO. As mentioned, a brand’s likelihood to sell on Amazon platform is dependent on their ability to rank on the first page, and ideally near the top of the initial search results.

1.1.1. What are the unique advantages of these Amazon ads?

• Amazon describes the benefit as a 'visibility boost' and that’s exactly what it is. Sponsored Products ads give brand owners a chance to skip the line and compete with the top ranking products, organic and otherwise.

• Sponsored products are native-looking. To many consumers, they are indistinguishable from the organic search results and have the benefit of targeting 'low funnel' consumers who are ready to convert (= buy).

• These Amazon ads have a high conversion rate. Because they appear on product details pages too, they are hard for consumers to miss.

• In addition to generating sales, Sponsored Products can help you find the most profitable keywords and sales strategies for all of your advertising campaigns.

1.1.2. Amazon Advertising Strategy № 1 – Use Sponsored Products to…

• Promote new products that aren’t currently ranking on the front page, especially where the brand is less relevant:

• Secure the top spot – even in the case that you already have a strong organic SEO (If you don’t bid on this spot, someone else will).

• Promote new or more profitable product varieties in a line:

Amazon Advertising Sponsored Products Hallmark Cards

• Reach customers who aren’t looking for your product but may want it:

• Advertise companion or competitive products on the Product Details Page:

1.2. Amazon Advertising: Sponsored Brands Ads

Sponsored Brands are “ads” in the more traditional sense on Amazon platform, meaning they appear distinct from the actual search results – like Sponsored Products do. But unlike a traditional Banner Ad, these have dynamic elements.

Click on the brand logo and you will go to the Brand Store (more on that later) but click on a product in particular (it will show up to three), and users are taken to the respective product details pages.

1.2.1. What unique advantages does this type of Amazon ads have?

• Sponsored Brands promote exposure on Amazon platform with a greater degree of control over the appearance and ad copy. Because the logo is predominantly featured in the ad, this helps generate brand awareness.

• Like Sponsored Products, because bidding is done on a keyword basis, brands have the opportunity to appear in the contexts they choose (more on that in strategy below).

• Sponsored Brands ads provide the opportunity to direct consumers to your Brand Store for an enhanced shopping experience.

1.2.2. Amazon Advertising Strategy № 2 – Use Sponsored Brands to…

• Defend your brand’s dominance in a category.

• Establish authority and trust among existing and prospective customers.

• Increase brand awareness (attract new-to-brand customers) in a competitive market.

• Give users considering your brand the best shopping experience possible by linking the banner ad to your custom Brand Store.

• Bid on your competitor’s loyal customers by having a Sponsored Brand appear in searches including their name.

• Appear in related categories.

1.3. Amazon Advertising: Not Ads

It’s important to understand which Amazon statuses are not ads. With Amazon’s success in creating native-looking ads, it can be challenging for even savvy consumers to tell the difference. While extremely valuable because of their ability to influence consumer behavior, these flags and statuses are not for sale nor are they manually assigned:

• Best Seller Badge

• Amazon’s Choice Badge 

• Editorial Recommendations 

• Reviews 

While some rogues have attempted to ‘game the system’ by making fraudulent purchases or reviews in an attempt to cheat Amazon’s algorithm, these black hat tactics are very likely to be punished when they are inevitably uncovered by Amazon’s team.

1.3.1. Amazon Advertising: Brand Stores

Lastly, a Brand Store is not technically an Advertising type because it is free for brands enrolled in Amazon Brand Registry. But, it is a useful, even essential, accompaniment for Sponsored Brand Ads.

A Brand Store is like a branded miniature E-Commerce store within Amazon that gives brand owners a great deal of creative control over how their products are presented. 

They also have the benefit of being one of the few places on the platform where users will not find competitive Amazon ads: You have consumers’ undivided attention here. 

These stores are a chance to take your content to the next level, with more lifestyle oriented video that tells the story of your brand beyond the marketing specific product features – though there is plenty of room for that too. Logistically, this makes a convenient landing page for marketing efforts off Amazon as well and a useful anchor for tracking KPIs.

1.4. Amazon Advertising: Sponsored Display Ads (Beta)

Source: Amazon Advertising: https://advertising.amazon.com/products/sponsored-display

Amazon Sponsored Display Ads combine “Sponsored Products” and “Display Ads” which we will get into in more detail in the next section. Like Sponsored Products, no assets are needed. These Amazon ads are generated based on the product listing and link directly to a product details page. Of course, this means they are exclusive to brands selling on Amazon.

Unlike traditional “Sponsored Products” which appear on Amazon platform in search results and product pages, they appear off Amazon, on third-party websites and apps. These ads appear only when they are relevant to the consumer: For example, when they searched for keywords relevant to your products or customers who previously purchased your products.

Brands also have the option to pay for these ads by impression, instead of by click.

1.4.1. Unique advantages?

• This Amazon ad format offers the extended reach and advanced targeting style of a website Display Ad (more on that later) without the burden of having to design assets: No artwork or copywriting needed

• Similarly, these ads offer broad-style targeting of “Lifestyle Audiences” with the directness of a product purchase nudge.

1.4.2. Amazon Advertising Strategy № 3 – Use Sponsored Display Ads to…

1. Reach beyond Amazon’s pages to expand a higher funnel strategy: inspire interest by advertising products according to targeted groups.

2. Expand an even lower funnel marketing strategy: Encourage retention by promoting similar or complementary products to ones purchased.

3. Encourage brand awareness and recognizability for your brand outside of a shopping context – on websites and apps consumers trust.

4. Perform traditional retargeting by advertising a product that the user clicked on, searched for, or otherwise expressed interest in.

5. Advertise a high converting or popular product to boost sales for that item.

PART 2: Amazon Advertising on & off Amazon a.k.a. Amazon Advertising Network

This type of Amazon Advertising is for products and brands on & off Amazon.

Like Facebook and Google, Amazon platform employs Pixel Based targeting so that users’ behavior can be tracked and data can be captured by virtue of their visiting a website, specific pages, or by performing certain actions. Data capturing is used in combination with a Collaborative Filtering Engine, which interprets the huge quantity of individual data points associated with a single user to create a user profile. 

Amazon is then able to complete the picture by comparing data and behaviors by users who appear to be similar. These are educated guesses that can predict shopping behavior with impressive accuracy. An example of a niche would be: employed males between 18 and 45, living in a rented house with an income of over $30,000 who enjoy foreign films.

The more patterns and data points that Amazon collects, the more efficiently fine-tuned its recommendation and predictions will become. So brands’ ability to target users who made similar, complementary, or competitive purchases is really just the beginning. Users only need to demonstrate behavior that hints that they might want your product.

In sum, the major draw is the data and intelligence earned from Amazon consumers, combined with access to Amazon’s Advertising Network, including Alexa and AWS Amazon Prime Video, Amazon Music, Amazon Publishing, Amazon Studios. 

There are 2 main formats (Video and Display Ads) managed under the umbrella of Amazon DSP (Demand Side Platform), and Custom Ads (which encompasses all previous formats):

1. DSP: Display Ads & Video Ads

2. Custom Ads

Q: Who can buy Amazon DSP Ads?

A: Brand owners (whether or not they sell products on Amazon platform)

Q: How much does it cost?

A: These Amazon Ads are sold by impressions, the cost varying depending on placement and format. This pricing model is called CPM (cost-per-thousand impressions). At the moment, only managed-service options are available, which carry a minimum spend of $35,000.

Q: What are the common challenges?

A: There wasn't really a “self service option” for Amazon DSP until Perpetua built their Amazon DSP optimization software. Brands previously had to either go through an agency, called ESS (Enterprise Self Service) or choose the managed-service option through Amazon. Beyond the minimum spend, these ad formats are costly to produce: They require a lot of creative resources to generate images, video, and copy. P.S. A strong brand identity is needed to make the most of these ads.

Speaking of making the most of ads on and off Amazon, Amazon Advertising has recently introduced a companion product, currently in beta, called Amazon Attribution. Though not strictly an ad format, we’ll discuss that too.

2.1. Amazon Advertising: DSP Display Ads

Source: Amazon Advertising – https://advertising.amazon.com/products/display-ads

Amazon Display Ads are what we commonly think of when we think of onsite ads. They may be desktop and mobile web display ads, banner ads, mobile interstitial ads, and can link anywhere. They can show on Amazon, Amazon devices, Amazon owned and operated sites and other websites using ads. 

2.1.1. What are the unique advantages of this Amazon advertising type?

• While creative assets take time and resources to create, they also present brand owners an opportunity for on-brand storytelling.

• Display ads can help with brand recall lift. Having mere exposure to a brand will help users to recognize it in a shopping context (whether or not consumers clicked on the ad).

• Repeated exposure in a trusted context can help build trust and foster brand loyalty in existing and prospective customers.

• These ads can also link to a custom Brand Store on Amazon.

2.1.2. Amazon Advertising Strategy № 4 – Use Display Ads to…

1. Expand a higher funnel targeting strategy to create awareness of your product or brand. For example, if an Amazon user purchases yoga pants, a brand may advertise a yoga ball (similar product) but insights might also indicate the same audience would be interested in a book on holistic wellness.

2. Fine tune your brand’s target demographic by monitoring the performance of your Amazon advertising in a variety of contexts, targeted to a variety of platform-generated user profiles.

3. Expose your brand to new promising audiences with the chance to monitor its performance in new contexts.

4. Improve PPC performance with higher funnel brand exposure: A user might not click the ad, but may search the brand after having seen it.

5. Gain insights from Amazon’s data and intelligence. You might be surprised to learn that your Amazon ad is performing well with women over 50 who love coffee. This could inspire more effective marketing strategies across the board.

6. Better learn about your audience and buyers. A brand might discover, for example, that their ads are converting well among retired women who love to bake. Knowing this could (and should) inform future marketing strategies and segmentation.

Want to know more about the Amazon DSP? Download our deep-dive study today.

2.2. Amazon Custom Ads

Finally, Amazon offers Custom Ads, which is a holistic Amazon Advertising service, instead of a particular ad type. Custom Ads might include any and all ad formats mentioned above. 

Q: How much does it cost?

A: What distinguishes Custom Ads from the Amazon DSP Ads is that there is no ESS option here. Consider this Amazon’s white glove service – incorporating any and all of Amazon’s ad styles. 

2.2.1. What are the unique advantages of Custom Ads? 

This holistic approach to advertising can make use of any number of other ad formats and styles at Amazon’s disposal. Truly custom ads, they require a minimum spend – of which the precise amount is unknown.

2.2.2. Advertising Strategy № 6 – Use Custom Ads to…

• Gain access to a full funnel advertising strategy which is fully integrated with your Amazon Business, without needing to have in-house Amazon Ad expertise.

2.3 Amazon DSP Advertising: Amazon Attribution

Amazon Attribution is a platform that promises to help you to evaluate the performance of all of your digital marketing activities by measuring how specific platforms and advertising campaigns are impacting your performance on Amazon.

This means that, in logging on to Amazon Attribution, you could assess the performance of your Google Ads, paid Facebook campaigns, non Amazon DSP Ads, and your email marketing strategies, in one place. The only common denominator is that each campaign be linked directly to an Amazon page, like a Brand Store or Product Details Page. 

While select Amazon brands have been using this feature since 2018, Amazon only officially included this product in the Amazon Advertising menu in January 2020.

Q: How much does it cost?

A: This companion product is ‘free’ but only meaningful if you have the time to carefully organize your advertising campaigns and channels and implement tracking tags accordingly.

2.3.1. What are the unique advantages?

• Transparency. The principal idea is that you can attach digital marketing efforts (like a newsletter send) to tangible results or conversions (such as DPV: Product Details Page Views). 

• Time and resources management. Understanding what is working well and what needs improvement can help you shine the light on where more efforts are needed.

• Convenience. Of course, there are other ways of measuring specific impacts of your digital marketing efforts. But, Amazon Attribution promises to consolidate these in one place and link them directly to Amazon activities.

2.3.2. Amazon Advertising Strategy № 7 – Use Amazon Attribution to…

1. Track which digital marketing efforts are bringing you closer to your goals.

2. Determine which specific campaigns are more successful, which can inform your strategy across the board.

3. Focus your marketing efforts where they are most relevant.

4. Abandon or change strategies or channels which present high effort and low return.

How To Create a Coherent Amazon Advertising Strategy

As we discussed throughout this article, different types of Amazon Advertising ads have different pros and cons as well as use cases. That’s why they are suited for different stages in the customer journey or so-called purchase or marketing funnel.

Amazon ads are most powerful if they are combined into a coherent and efficient Amazon advertising strategy that targets and nurtures customers along these stages of their customer journey. In the following example we illustrate how such a coherent strategy could look:

Imagined Product & Brand: Serious Traveler’s Survival Backpack (STSB)

Background: Amazon Data

• Sophia loves the environment and hiking. Her shopping habits on Amazon reflect those values.

• Sophia has been identified as belonging to the Lifestyle group ‘nature lovers’ by Amazon.

Sophia’s purchasing journey

• When Sophia is streaming her favorite show on IMBDb TV on her laptop she sees a short video commercial for a survival backpack. Her interest is piqued but she is keen to return to her show.

  • Funnel Stage: Awareness

  • Ad type: Video ad for STSB served to Lifestyle group ‘nature lovers’ through placement on Amazon Fire TV.

• While she is catching up on her favorite cooking blog, Sophia sees a display ad in the corner of her eye, but pays it no mind.

  • Funnel Stage: Interest

  • Ad type: Website Display Ad for Desktop served to Lifestyle group ‘nature lovers’ through placement on selective websites.

• On another day, Sophia is shopping on Amazon, she remembers that she has a hiking trip coming up and could use a new backpack. She searches on Amazon for ‘survival backpack’. Sophia notices the Sponsored Brand Ad by the STSB brand at the top of the search results. Ther brand looks familiar, and that familiarity translates to a vague sense of trust. Sophia clicks through the ad to find the impressive and engaging Brand Store. Lovely as it is, Sophia decides to do some comparison shopping by heading back to the search results.

  • Funnel Stage: Consideration

  • Ad type: Sponsored Brand Ad flagged by keyword targeting.

• Sophia again searches for survival backpack and clicks on several Sponsored Products ads as well as organic results and visits product pages, comparing brands, materials, weights etc. On a competitive product’s page, Sophia notices a Sponsored Product ad for STSB, with a coupon! Sophia adds the item to her cart, and forgets about it.

  • Funnel Stage: Conversion

  • Ad type: Sponsored Product Ads in search results (flagged by keyword targeting) and on the competitive brand’s product page (flagged by ASIN targeting).

• Sophia is reading an article on Huffpost, and is reminded of the attractive STSB (with what looks like an Amazon product listing) and that her trip is looming. The ‘buy’ button is right there on the ad, so Sophia completes the purchase!

  • Funnel Stage: Retention

  • Ad type: Sponsored Display Ad using ‘Remarketing’ targeting.

• Of course, consumers bounce around the funnel. A strictly linear path from top to bottom is rare. However, a full funnel strategy, engaging consumers at various points in their journeys, can keep your brand and product fresh in mind and build a relationship with your target audience. Ideally, with the right marketing support, your consumers are worth so much more than the sum of their sales as they become ‘brand evangelists’, generating referrals.

  • Funnel Stage: Referral

  • Ad type: Custom Ads and/or any combination of the above Amazon Advertising formats. Because ‘Custom Ads’ incorporate all of the previous formats, it would be possible to craft a full funnel strategy using this ‘format’. However, this can also be performed with a more hands-on approach, using a combination of different ad formats and management systems, without Amazon’s direct oversight.

Advertising on Amazon: Conclusion 

As an Amazon Seller or Vendor, not investing in Amazon PPC is leaving money on the table. The question is: “Which ads for which products and how to manage them in such a way that you get the maximum possible return?”

However, a robust Amazon advertising strategy should include a full funnel approach. If your business is not already investing in off-site ads, Amazon DSP offers an integrated solution for the top and bottom of the funnel.

• At the top, introduce audiences likely to want your products to your brand with Video / Display Ads

• At the bottom, convert buyers to brand evangelists with Sponsored Brands, Display, and DSP

How to Advertise Your Product on Amazon: Key Takeaways

1. Getting your PPC act together – make sure the ads are working for you.

2. Building a Brand Store now to make the most of Sponsored Brands and all off-Amazon marketing.

3. Broadening your marketing strategy funnel with DSP Ads.

4. Using the insights gained from DSP campaigns to improve all marketing streams including offline marketing, DSP, and PPC campaigns.

5. And always: Monitor and improve. Repeat!