Are Amazon Sponsored Products Ads Worth the Investment?

The Amazon marketplace is a competitive world. Businesses that aim to make it in this platform know that visibility can determine your success or failure. Amazon sellers compete with millions of other vendors, which include individual entrepreneurs, small businesses, and large companies. All of them are actively vying for customers' attention. Hence, sellers promote their brands using various advertising strategies.

Of all the advertising programs Amazon offers, the most popular is the Sponsored Products option, as evidenced in an Amazon report that stated a substantial rise in sales for advertisers using this ad type. Because of the prominent and strategic visibility that Sponsored Products ads offer, shoppers are able to discover products more readily, leading to higher revenue figures for Amazon sellers.

On average, Amazon listings have a conversion rate of 13% for non-prime members, indicating high user intent. According to Perpetua, an Amazon advertising solution, conversion rates for Amazon Sponsored Products went up in Q2 2023, wherein one particular category had 17.5% of clicks that resulted in a sale. 

But with all the competition you’re facing in the Amazon marketplace, will investing in this method prove worthwhile in the long run, especially for beginners? Would the costs be justified if it becomes expensive and time-consuming? Let’s look at the pros and cons of Amazon Sponsored Products ads and see if they’re a worthwhile investment. 

What Are Amazon Sponsored Products Ads?

Sponsored Products ads are pay-per-click (PPC) ads displayed in strategic areas on the online marketplace. They are often visible in search results on Amazon, typically next to the searched items. Often resembling organic listings, they are the most commonly used Amazon PPC ad, making up 78% of overall ad spend among sellers. Sponsored Products ads are available to professional sellers and vendors on the Amazon platform. 

There are two types of keyword targeting methods Amazon sellers can use: automatic targeting and manual targeting. With automatic targeting, Amazon determines the best keywords for your product based on data it gathers from buyer clicks and purchases. The platform adjusts the ads to adapt to the listing and improve conversions.

In manual targeting, you hand-pick the keywords you want to bid on. These ads are only displayed if a buyer’s query matches your chosen keywords. As it is a more hands-on option, it requires constant monitoring of costs and making adjustments when necessary. Because of the deeper level of optimization involved, it results in more effective ads and less expensive long-term advertising expenses.

Through Amazon Sponsored Products ads, you can promote products individually on the platform. Plus, the strategy helps increase traffic to your product page, which ultimately boosts sales. These ads are classified under the PPC ad model, so you only pay Amazon when shoppers click on your advertisements.

How Do Sponsored Products Ads Work on Amazon?

Sponsored Products ads appear on various specific locations on Amazon and work by promoting individual product listings. They are typically displayed at the top of or within shopping results, to the right of organic results, on relevant product detail pages, and even on competitors’ product pages. 

Using the Sponsored Products ads method involves establishing a daily campaign budget that you’re willing to pay for over a calendar month. Since you control the total amount you want to spend on your campaign, you can adjust your daily budget as you see fit.

Shoppers who click on your Sponsored Products Ad will be directed to the corresponding product page. From there, they can finish making their purchase. Whether the customer purchases your product or not, you must pay the amount of your keyword bid.

In August 2023, Amazon announced that Sponsored Products will start appearing on websites and premium apps. This move will further enhance product visibility and increase sales prospects.

How Do Offsite Sponsored Products Ads Work?

Amazon sellers who pay extra for Sponsored Products ads can take advantage of new ad opportunities through off-Amazon placements. You can have your ads appear on apps and other websites like Pinterest, Buzzfeed, Mashable, and Lifehacker, among others. All these have links that go back to your Amazon product detail page. 

The way these offsite ads work is similar to placement ads, in which they appear when a potential buyer browses the platform. When a user clicks on one of these ads, they will be taken to your Amazon product detail page. The user then has the option to proceed to add the item to their shopping cart and complete the purchase process.

The ads will typically feature product details and include pricing, stock availability, and ratings. The display of these ads will depend on various factors, including the cost-per-click parameters established by the seller, campaign details, and the page context. 

For these ads to appear, the product must be in stock. They must also have the attributes that help customers make informed decisions before clicking on an ad. These attributes are Prime delivery commitment, accurate pricing details, number of reviews, and star ratings. 

The offsite ads will only appear to customers who have potential interest in the advertised products. This assures relevancy to viewers and helps increase the possibility of engagement. Sellers also have the option to not display their Sponsored Products ads on external platforms if they deem it unhelpful in their ad strategy.

Do Amazon Sponsored Products Ads Work?

It’s a given: Amazon ads are highly effective in driving traffic to your product listings. With their noticeable placement in relevant searches, buyers are driven directly to your sales page. However, you need a keen understanding of how to develop your campaign to entice shoppers and direct them to your Amazon store to make a purchase.

What you achieve on the platform will depend on several factors: 

• Keyword strategy. As you promote your products on Amazon, consistently optimize your ads for optimal performance. Experiment with various keyword strategies and develop well-organized campaigns. Add negative keywords to your PPC campaign. This is to prevent your PPC ads from being shown to users with irrelevant queries or who are looking for content immaterial to your business.
• PPC budget. Your budget must be equivalent to your expectations. Log in to your Amazon Seller Central account and find your conversion rate per item using the Unit Session Percentage section. This data will tell you the average percentage of visitors who made a purchase. Do a quick math to determine the expected number of purchases based on the number of expected clicks. From here, you can figure out the number of clicks it will take to convert into sales. With this process, you’ll know how much to set for your PPC budget to accomplish your goal.
• Positioning. Regardless of how prominent the placement of your ad might be, it won’t matter if the pricing or quality of your product doesn’t match its marketplace positioning. Most buyers shop around before making a purchase. If other ads provide competitive pricing or have better product ratings, buyers will likely bounce off your page and purchase from the competitor’s store. The best way to help avoid this is to make sure your product is of superior quality, provide excellent customer service, and monitor your competition. 
• Product photography. Photos are critical to your business. As online shopping makes it impossible for shoppers to hold and inspect your product, your best bet is to use high-quality images in your ads. Showcase the product features, emphasize it from different angles, and include action shots. Images must precisely represent the product and match the product description. As you implement all these, make sure your photos also adhere to Amazon’s image requirements.  

Pros of Amazon Sponsored Products Ads

The following are some of the advantages of using Amazon Sponsored Products ads:  

• High conversion rates. The conversion rate of Amazon Sponsored Products ads is approximately 10%. In comparison, the average eCommerce conversion rate is only around 2.5-3%. A solid conversion rate strengthens your SEO efforts and shows that your initiatives are working since you’re attracting your target customers and persuading them to take action. 
• Pay-Per-Click. As mentioned, Amazon Sponsored Products ads are under the PPC model, so you only pay when shoppers click on your ad. The cost you incur generally depends on how competitive your chosen category is. The cost of PPC campaigns can range from $0.15 to $6 per click.
• Easy setup. You only need to select the product (or products) you want to boost, pick the targeting method, add your chosen keywords (if using manual targeting), and set the campaign name and budget. Then, your campaign is ready to go.
• Better visibility. With Amazon Sponsored Products ads, you can find your products in more prominent placements. These include various locations in search results and on product pages, all of which lead to a significant boost in visibility.
• No upfront or monthly fees. Sponsored Products campaigns require no upfront or monthly charges. You choose the amount you want to pay when a customer clicks on your product ad. If you have a reasonable bid, your ad has a better chance of getting displayed when a shopper query matches it.
• Boost sales with a few clicks. Sponsored Products takes shoppers instantly to the seller’s product detail page, boosting the sales of individual products. It also makes it easy for shoppers to browse products or buy them in one or two clicks.

Cons of Amazon Sponsored Products Ads

Alternatively, here are the disadvantages of using Amazon Sponsored Products ads for your PPC campaigns:

• Fierce competition. Due to the multiple benefits of using Sponsored Products ads and because it is the most popular ad choice, all sellers opt for it, making the rivalry for customers more intense. Also, depending on your niche, competition can be cutthroat, possibly impacting your product visibility.
• Time-consuming. Setting up a campaign and actively monitoring, managing, and optimizing it can be laborious and require a significant time investment. You may need to regularly evaluate the performance of your ads, make changes based on data analysis, adjust keywords, analyze data, and perform other tasks to maintain an effective advertising strategy.
• Ad spending may cut into your profits. If not properly managed, your PPC campaign may eat into your profit margins. If your budget is too low, there won’t be a sufficient volume of users who click on your ads to achieve profitability. But if you spend too much, this may negatively impact your return on investment.

Is It Worth It to Use Amazon Sponsored Products Ads?

With all the benefits that Amazon Sponsored Products ads offer, investing time, effort, and money in it can be worth it. You must, however, remember that launching an advertising campaign on Amazon is not something that you set and neglect. It is a task you must constantly keep an eye on to ensure that it maintains a profitable performance.

To achieve better results in your advertising campaign through an improved understanding of your market and your competitors, use third-party tools like Threecolts, Helium 10, Jungle Scout, AMZ Tracker, Viral Launch, and Sellics.

With Amazon PPC ads, you can promote your products in highly visible positions while having flexibility in your ad spending budget. Plus, you have plenty of metrics you can use to determine the overall effectiveness of your PPC campaigns.

For it to be effective overall, you have to ensure your business benefits from it. Check that your ad campaigns are successful. Constantly monitor them and evaluate what’s working or not. Likewise, track your return on investment and adjust your ad strategy so that it aligns with your business goals.

Best Practices for Your Amazon Sponsored Products Ads

Amazon provides a host of opportunities for sellers to thrive and succeed on the platform. However, it requires commitment and a strategic methodology. Here are some key best practices that can help you benefit from Sponsored Products Ads and maximize your overall potential:

• Make your product page visible. Help customers find your product using Sponsored Product ads that appear on product pages and shopping results. Choose the product you want to boost, use automatic or manual targeting for the keyword or product, set your ad budget, and link shoppers directly to your product detail page. 
• Optimize your product listing. Create a descriptive product listing that showcases high-quality zoomable images. Use bullet points for key product details and provide quality content for the product description. Include search terms that shoppers might use when searching for the item they want to buy. If you are enrolled in Amazon Brand Registry, take advantage of A+ content that lets you use enhanced images, text placements, and stories to describe your product features. 

• Add relevant queries that can help connect your product to shoppers. Refer to the Search Term report in your advertising console to find these terms. Add these search terms to the product title, product description, and bullet points. 
• Include negative targeting in your ad strategy. Refine your audience by implementing negative targeting. Prevent your ad from appearing on pages that are not relevant to your business goals. Identify items with high clicks but with no sales as well as brands that are not complementary to yours. Add these negative products to your ad campaigns.  
• Manage your ad spend and choose your bid strategy. A minimum daily budget of at least $10 helps keep your ads live throughout the day. Adjust this amount at any time or as necessary. For your bids, choose a campaign bidding strategy to manage how you’ll pay for clicks on your ads. If you want to control the locations where your ads appear, use placement bid adjustments.  
• Understand the performance of your campaigns. This will help you measure your impact or success. Amazon provides reports on search terms, targeting, advertised products, placements, and performance over time. Review these weekly to recognize aspects that need improvement.
• Boost your product performance. Choose a product that constantly displays the featured offer. It should ideally have five or more customer reviews and a rating of at least 3.5 stars. Keep it reasonably priced and in stock. Promote it with a Prime badge to make it attractive to shoppers. 

Doing these will help your products stand out and improve brand awareness. With a solid Amazon ad strategy using Sponsored Products ads, you elevate your Amazon marketing and enhance support for your business goals. Subsequently, you can develop trust with customers, gain market share, and drive conversions. 

In contrast, venturing into this endeavor without a strategy can cost you thousands of dollars. Failing to consistently modify your strategy to align with your specific situation can likewise result in substantial financial losses.  

Final Thoughts

For Amazon sellers, Sponsored Products ads can be useful and valuable tools. But they have to be managed properly and adjusted accordingly when necessary. By using Sponsored Products ads strategically, you can maximize their potential. Furthermore, they can be your ticket to increased product visibility, improved traffic, and superior sales performance.

Browse through and read our other blog posts that are data-driven insights with our very own proprietary data and learn more on Mother's Day trends and best practices, Easter sales, price elasticity of demand, Amazon FBA fee changes, Amazon product title optimization, winter seasonal products, Amazon end of year sales, Valentine’s Day trends and best Amazon fulfillment centers by location and throughput.