Tuesday, September 27, 2022

How Much Does Amazon Spend On Advertising

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Measures Of Economic Freedom

How Much Should I Spend on Amazon Advertising?

The index uses five broad areas to score economic freedom for each country:

  • Size of Government: Greater government spending, taxation, and bigger government agencies tend to reduce individual choice and economic freedom.
  • Legal System and Property Rights: The ability to accumulate private property and wealth is a central motivating force for workers and investors in a market economy, and well-functioning legal frameworks protect the rights of all citizens.
  • Sound Money: Does earned money maintain its value, or is it lost to inflation? When inflation is high and volatile, individuals cant plan for the future and use economic freedom effectively.
  • Freedom to Trade Internationally: Freedom to exchangein its broadest sense, buying, selling, making contracts, and so onis considered essential to economic prosperity. Limited international trading options significantly reduce the potential for growth.
  • Regulation: When governments utilize tools and impose oppressive regulations that limit the right to exchange, economic freedom typically suffers.
  • Competition Is Heating Up

    One reason to believe that Amazon will need to continue spending heavily on marketing is the newfound focus of traditional retailers on e-commerce. Wal-Mart has become extremely aggressive, launching a free two-day shipping initiative earlier this year and finding ways to remove costs and lower prices for customers. Wal-Mart’s online sales grew by 63% year over year during the first quarter, twice its growth rate during the previous quarter.

    Best Buy has also turned up the heat over the past few years. The company implemented a price-matching policy both in-store and online, and it started shipping some online orders from its more than 1,000 stores. This not only improved the availability of items online, but it reduced shipping times as well. Best Buy turned its store base, viewed as a liability in the age of e-commerce, into an asset. These initiatives helped drive online sales growth in excess of 20% in the first quarter.

    But for the same reason that Amazon needs to spend so heavily on marketing to drive sales, traditional retailers going after online sales will likely need to do the same in order to drive customers to their own websites. I wouldn’t be surprised to see advertising costs as a percentage of revenue creep up in the coming years for retailers like Wal-Mart and Best Buy as they grow their online businesses. That could, in turn, drive up advertising rates for Amazon and lead to even higher spending.

    Key Advertising Metrics For Measuring Your Results

    Amazon provides a range of tools and reports to help sellers analyze their campaign performance and measure success. Once youve set your campaign in motion, youll get auto-generated reports from Amazon that provide insight into the sales data of your advertised products and the performance of your individual campaigns.

    With these advertising analytics, youll get a birds eye view of your performance and identify successful tactics to increase conversions and optimize your campaigns.

    Depending on your current advertising objectives, some of these metrics may be more important to you than others.

    For example, youll probably hear a lot of people giving tips to lower your ACoS. While high ACoS is certainly something to watch out for in general, if your goal is to rapidly build sales velocity , you may be willing to spend a little more in order to get more sales.

    Thats why having a clear vision of what you want to achieve, choosing the right metrics to measure that success, and knowing how to break down that data into insights are all key steps in the process of figuring out how much you should be spending on Amazon advertising.

    Heres a brief rundown of some of the key metrics youll want to know when it comes to Amazon advertising

    Reach: Total number of shoppers who have seen your ad on any screen or web page

    Impressions: The number of times your ads were shown to potential buyers

    Attributed Sales: Total product sales generated within one week of clicks on your ads

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    What Is A Good Amazon Acos

    There is no perfect ACoS on Amazon that you should strive for, it can vary by company, product, and goal! So then how do you determine the best ACoS for your ecommerce campaigns? Ideally, youll want to get the highest sales revenue possible, combined with the lowest ACoS possible. Because low ACoS means high profitability and high ACoS means low profitability, sellers tend to push for low ACoS unless they are working on a specific awareness or sell-out strategy. Weve outlined a few of the factors that can help you understand your best Amazon ACoS below:

    How Most Keywords Actually Perform

    How Much Does Amazon Spend on Search Engine Marketing?

    Teikametricsanalyzed all of their clients keyword and associated performance data during a 4-month period in 2019 involving 6.5 million keywords and thousands of advertisers.

    The Keyword Trap

    They found that about 60% of all keywords got no clicks at all over the four-month period. 97% received less than one daily click.

    It took an average of at least three clicks per day for a keyword to generate revenue more than what it cost to place an ad.

    The lesson to be learned here is that just throwing a bunch of keywords into the products hidden keywords on Amazon wont result in striking gold. It requires tracking the performance on a regular basis, and re-allocating your ad dollars to the best performerswhich may change over time.

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    Value Of The Search Term

    You always want to investigate the value of search terms before committing your budget. This is also critical to setting realistic RoAS/ACoS goals. For example, branded vs non-branded search terms make a big difference. If you are targeting your competitor brands specifically on their branded search, you can effectively siphon traffic towards your listings. However, you should expect a lower conversion rate, and, therefore, lower RoAS.

    The other main factor to consider when looking at search term value is the volume of traffic. This has a big impact on the number of sales your ad-buy is likely to generate. However, high traffic terms are also likely higher competition. That means higher bids and lower RoAS.

    Amazon Spends More On Advertising Than Several

    Jun 17, 2017 Theres another cost that drives down Amazons margins: advertising. Amazon spent $7.2 billion on marketing in 2016, with that spending aimed at

    Apr 27, 2021 As Amazons advertising revenue skyrockets, Jungle Scouts new makes it much easier to attribute a companys advertising spend to actual

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    Amazon Cuts Ad Spend For First Time In 17 Years

    Pandemic led to lower costs for top global advertiser.

    Amazon cut its advertising spend by about US$100 million in 2020the first time it has reduced its outlay for 17 years.

    Advertising and other promotional costs were still broadly flat at $10.9 billion compared with $11 billion in 2019, down just under 1%, according to the annual report.

    It marks the first time that Amazon has cut annual ad expense since 2003, when its entire outlay was $109 million, according to company filings.

    Some online brands were able to reduce adspend during the coronavirus downturn because of strong demand for ecommerce from consumers and a temporary fall in ad-buying costs.

    In the case of Amazon, its annual sales surged 37% to $386 billion.

    Total marketing costs, of which advertising is a part, still rose 17% to $22 billion but dropped as a percentage of net sales.

    The company benefitted from lower spending on marketing channels as a result of Covid-19, the annual report said.

    Brian Wieser, global president of business intelliegence at Group M, said: While we might have expected that Amazon would have increased spending on advertising in line with spending growth on marketing, we can imagine that Amazon was in a relatively unique position in the early stages of the pandemic, where they would have risked generating more demand than they could handle if they pushed hard on adspend.

    Amazon Ads Fiction Case Study: Annelie Wendeberg

    How Much Should I Spend on Amazon PPC? The Complete 2021 PPC Budget Guide for FBA Sellers

    Annelie Wendeberg is an award-winning author of historical and climate fiction, and has been using Amazon ads on three of her books in the past few months: The Devils Grin , Keeper of Pleas , and 1/2986 . All three are the first books in their respective series.

    The results? Pretty good.

    I just started the ad for the science fiction, so I cant say anything about performance yet. The mysteries are doing pretty well, with an ROI of around 500% .

    Heres a first pointer for you series authors: advertising the first book in the series means that the readers youll acquire through the ads can then purchase and make their way through the rest of their series.

    Another good pointer is the type of ads Annelie went for:

    All my ads are sponsored product ads running with manual keywords. I didnt try Display ads yet, because I find the placement odd kind of far away from where I would look when Im interested in purchasing a book.

    Now, the main issue when running Sponsored Product ads with manual keyword targeting is, well finding the right keywords. Heres how she goes about it:

    I try to find authors and books that are similar to me and my books, and then I test those keywords. Anything that performs well is then again tested for similar keywords. And so on.”

    Annelie also says:

    Takeaways for fiction authors:

  • Advertise the first book in your series
  • Try Sponsored Product ads first
  • Use manual keyword targeting and test keywords patiently
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    How Do Targeting Options Affect Advertising Cost

    Advertisers use to determine where their ads appear. Your chosen targeting options influence where your ads placement and the shoppers who will see on your ad.

    Based on the keywords or products you want to target in your Amazon advertising strategy, your costs will change.

    Keyword Targeting

    Keyword targeting allows advertisers to choose keywords related to their product to determine which search queries they may appear for.

    Lets take a very basic example of this idea. If youre selling a phone case, selecting the keyword phone case means your ad will appear in search results and detail pages when a customer searches for a product with the search term phone case.

    Now, there are other considerations like keyword match type that will influence how Amazon matches your chosen keywords to a customers search queries, but this is basically how keyword targeting works.

    Successful keyword targeting campaigns help to drive impressions, ad clicks, and sales. If you dont use the relevant, profitable keywords, you may get fewer clicks and conversions. On the other hand, if your keywords are irrelevant to what the shopper is looking for, youre likely to waste ad dollars without conversions.

    The targeting options available to your business depend on your ad campaign type. Keyword targeting is available for Sponsored Brand and Sponsored Product Ads.

    Product Targeting

    Product targeting is available for Sponsored Brands, Sponsored Products, and Sponsored Display campaigns.

    What Is Amazons Average Daily Clicks

    Just like it sounds, daily clicks are the total volume of clicks on your ads per day.

    The average daily clicks on Amazon is around 382 per user.

    Average Clicks per User per Day on Amazon

    Impressions naturally lead to clicks.

    Once your products have a high number of impressions, its up to you to optimize your main image, title, and other listing attributes to convince buyers to click on your product in a sea of options.

    As you can see here, average daily clicks tends to vary widely over the months. Its best used with impressions and conversions to inform decisions.

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    Alexa Isnt Quite The Instant Buying Tool Yet

    Although some 50 million have been sold since they were released in 2015, theyre not yet being widely used for purchases. Users ask Alexa questions and check on order statuses, but only about 2% of them use Alexa for making new purchases. It shows that users still highly value seeing products and reading about them before purchasing them.

    Why Is Amazon Ppc Advertising Important

    Amazon Prime Spending vs Non

    Amazon PPC helps you temporarily own valuable real estate on the Amazon marketplace. By getting your product in front of shoppers at the right time with paid ads, you can win clicks and sales from competitors.

    Its important to recognize the relationship between paid and organic placements:

    • Paid placements are PPC ads that appear on the Amazon marketplace. You only pay if a customer clicks on your ad.
    • Organic placements are the most relevant results based on the search inputs. You dont pay anything if a customer clicks on your product listing.

    In summary Amazon PPC is used to grow sales and protect market share.

    Amazon PPC performance is measured using a metric called Advertising Cost of Sales , which is displayed as a percentage. If a brand is observing 25% ACoS for an advertising campaign, that means they are spending $25 on ads for every $100 in sales from advertising.

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    Setting An Advertising Budget

    Your advertising budget, simply put, is the maximum amount of money you want to spend on your campaign. Again, this should be backed by a clear marketing goal and strategy.

    While some brands spend hundreds of dollars every month, others invest thousands of dollars. On average, brands who launch sponsored ad campaigns with a budget of atleast $5 increase sales by up to 140% attributed to advertising compared to businesses who set budgets lower than $5.

    Before you set your budget, think of the results you want to achieve, how much you can spend, and the campaign duration. If youre going to achieve positive results, you should set budgets that fit your unique business needs and expected campaign results.

    Why Does Amazon Advertise So Much

    Why is Amazon spending so much? Amazons ad spend has steadily increased because the company has boosted its spending on promotional costs to market Amazon products and services around the world. Amazon also has many brands under its umbrella to market: Fire, Alexa, Kindle, Prime, and Twitch are just a few.

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    How Many Daily Impressions Should You Expect For Amazon Ppc

    Based on our 2020 data, the average number of daily impressions per user per day was 101,265. However, this data changed significantly in 2021.

    Amazons Average Daily Impression in 2021 is anywhere between 40,000 to 60,000.

    Average Impressions per User per Day on Amazon in 2020

    101,265

    Amazons Average Daily Impressions decreased by nearly half because of the pandemics impact on global marketplaces and the influx of Amazon sellers.

    Find Your Roas Balance

    I Spent $50,000 on Amazon Ads for Books – Hereâs What I’ve Learned

    Its important that you find a balance. You dont want to spend too little to advertise your products and not get enough exposure. On the other hand, you dont want to spend too much and narrow your profit margin.

    One lever you can set is a minimum RoAS . This is the break-even point. The point where youll start losing or making money as a result of your ad spend.

    Savvy Amazon sellers use different target RoAS for different types of products to maximize their selling potential. While having a high RoAS is great for profitability, a low RoAS can increase visibility, dominate a niche, and lead to more profit in the long run.

    A good RoAS is governed by your strategy but it can always be optimized.

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    What Is A Conversion

    A conversion is when someone clicks your ad and then purchases that product.

    Dont confuse this number with units sold. One conversion alone could result in 10 units sold if the one converting customer buys 10 units. Two conversions could also result in 10 units sold if two converting customers buy 5 units each.

    The average amount of conversions on Amazon Ads is 36.67 conversions daily.

    Average Conversions per User per Day on Amazon

    36.67

    Evolution Of Amazon Prime: Digitally Advertising An Online Shopping Holiday

    Amazon created the first Prime Day to commemorate the companys 20th anniversary on July 15, 2015. Promoted as bigger than Black Friday, the day-long event promised exclusive sales to Prime members on a wide variety of products. Despite the early criticism of the deals offered, the sale day became an ever-growing cultural and economic phenomenon. Every year shoppers could expect deals on everything from apparel to books to household wares and smart home tech. Prime Day has grown to spawn deal days at competitor retailers and has forever altered the way many consumers shop.

    Prime Day has reached a ubiquity usually only associated with major holiday sales, and Amazon invests a portion of its digital advertising budget annually to promote the event. With that in mind, lets take a look at Prime Days dynamic growth over the years by tracking Amazons digital advertising for the event in 2015, 2018, and 2021.

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    How Do I Increase My Daily Impressions

    Learn to drive both organic and paid traffic if you want to increase the number of impressions your ads get.

    According to , for new products, its best to use paid ads to drive 90% of traffic initially and to rely little on organic traffic. However, as the product matures, he suggests that its better and better to transition to nearly 90% organic traffic eventually.

    The point is clear: use paid traffic early to increase daily impressions and then move to an organic traffic strategy.

    It also never hurts to fine-tune your SEO practices.

    How Ad Badger Increased Woodies Revenue By 216%

    Marketing Charts

    the bid algorithm cut out wasted spend and lower their ACOS to reach maximum profitability.

    As you can see, the Badger gets the job done. Read more about the Woodies case study.

    Another case study you might find interesting is one we published on behalf of Freshfield Naturals, available here, because we we increased their impressions by over 600%, tripled their clicks, and quadrupled their sales! Oh, and did we mention that we pulled all this off while lowering their ACOS by 18%?

    Frequently Asked Questions

    We are constantly on forums discussing Amazon marketing techniques with Amazon sellers.

    We see tons of good questions that give insight into Amazon sellers concerns, so, like any good Amazon PPC tool would do, we made a video about it.

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