Amazon is the world’s largest and leading eCommerce platform with 9.5 million sellers worldwide and 300 million active users. For any serious Amazon seller, advertising is the way to stand out on the platform. Investing in PPC campaigns not only generates traffic in the short run but also improves a product’s organic ranking in the long run.
However, it’s not enough to simply spend on advertising. A wise seller would aim to maximize ad spending. To do that, they must understand these critical ad metrics and how to use them to improve their PPC campaigns.
Amazon Advertising Statistics (2022):
Importance of Amazon PPC Ads
Amazon sellers earn from $26,000 to $810,000 annually. The difference between a high and low earner is how well they utilized Amazon ads. Amazon ads provide:
- Better product visibility
- Higher sales and revenues
- Improved brand trust and credibility
- Highly targeted audience reach
- Access to new and more diverse clients
As a seller, you can have the perfect winning products, but if they are not visible to the right market, you still lose out on potential sales. Using Amazon PPC Ads (Pay-Per-Click Ads), you place your product listings right in front of customers. The moment they search using your product’s keyword, your listing will be at the top of search results.
Amazon PPC Ads also help you reach buyers, not viewers. You can be sure that people who click on your ads have high intent to buy. What’s best is that you are only charged for every click, not the number of people who see your ads (impressions).
Now that you know how important Amazon PPC Ads are, and have decided to create and run them, your next question should be, how do I know which ads are working?
Important Amazon Ads Metrics
Increased sales and revenues are the best gauges to know if your ads are really working. But they are not the only ones. There are a lot of data points that will tell you if your ads are resonating with your customers or not.
Here are other critical metrics you need to know:
- Click-Through-Rate (CTR)
- Cost Per Click (CPC)
- Conversion Rate (CVR)
- Advertising Cost of Sale (ACOS)
- Average Daily Impressions
- Average Daily Clicks
- Average Daily Conversions
- Average Daily Spend
- Average Daily Revenue
Understanding these metrics will help you evaluate your campaign’s performance and ensure those advertising dollars are well-spent.
Click-through rates are the most integral components of any PPC campaign. They tell you the ratio of the number of clicks vs. the number of impressions your ads receive. It is crucial in letting you know whether your ads work in attracting customers to click on them.
The average CTR for Amazon Ads is 0.41%. Your CTR must be equivalent or above that. If it’s lower, you should consider tweaking some parts of your ads to make them more compelling or optimizing your keyword targeting to find the right customers.
Ways to Improve CTR
To improve your CTR, you should do the following:
- Review if the following parts of your ads are compelling:
- Ad Headline - Is it descriptive, accurate, creative, and unique?
- Image - Is it a high-quality realistic image?
- Reviews - Is the product highly reviewed with a good review score?
- Price - Is the price competitive?
- Check if your ads are using the right keywords which could be:
- Broad keywords
- Exact keywords
- Phrase keywords
- Negative keywords
Cost-per-click or CPC refers to the actual ad cost you pay for every click the ad receives. This is calculated as the total ad spend divided by the number of clicks. Advertisers bid for clicks and your goal is to outbid your competition to get the best position and visibility to reach your customers.
The average CPC for Amazon Ads is $0.89. However, lower CPC means higher ROI, so your goal is to optimize your campaigns to achieve the lowest CPCs. You can do this by running ads that accurately target your customers but do not attract high competition.
Ways to Lower CPC
Here are quick ways to lower your CPCs:
- Create relevant ads for your best SKUs.
- Utilize negative keywords.
- Experiment with keyword variations.
- Use long-tail keywords.
- Always check your campaign settings. If you’re aiming to lower your CPCs, go for Fixed Bid or Bid Down settings.
Conversion Rate (CVR) and Average Daily Conversions
A conversion happens when the customer clicks on the ad then makes a purchase. Conversion rate measures this event. It’s calculated as the ratio of the number of conversions (purchases) vs. the number of ad clicks.
Conversion does not measure units sold since one conversion can be equivalent to multiple units sold. This means the potential for higher sales for every conversion is huge.
The average conversion per user per day on Amazon is 36.67 while Amazon’s average conversion rate is 9.87%. This is higher than the average for other eCommerce platforms which is at 1% to 2% depending on the industry. This proves that visitors to Amazon’s websites are serious buyers. They are at the bottom of the sales funnel and are ready to buy. You just need to convince them that your product is what they’re looking for.
Keep in mind that the conversion rate per niche varies. Some products like luxury items are known to have lower conversion rates since buyers would typically shop around before making a purchase. Most Amazon sellers start as an FBA seller, but if your products become part of the Amazon Prime network, conversion rates can be as high as 74%.
Factors Affecting Conversion Rate
To optimize conversion rates, you need to understand the following factors affecting them:
- Keywords used
- Number and quality of reviews
- Competitive pricing
- High-quality product images
- Detailed product descriptions
Always conduct comprehensive keyword research and make sure you're using the right keywords for your products. While "Christmas Tree" may be a good keyword, if you're selling "Christmas garlands" and use this keyword just to increase impressions and clicks, people will quickly leave your listing because they won't find what they're looking for.
Customers love social proof and having a lot of high-quality reviews on your listing will affirm their choices. Your products’ reviews should be relevant and not sound forced.
Remember that there are thousands of sellers selling the same item on Amazon, and customers would always compare prices. Having a competitive price will ensure that customers consider your products.
Product images are the primary way customers are attracted to your listing. Use professionally shot product photos that will stand out in a sea of similar search results. In highly competitive listings, product titles and descriptions may be similar, and the only way to stand out is with an eye-catching photo. Just make sure the photo is still representative of the actual item being sold.
Lastly, don’t forget the product descriptions. You need to create accurate and keyword rich product descriptions. These are important for customers to understand what your product is all about and what value-added services you can offer to stand out from the competition. Also, having an optimized product description will help in your organic rankings.
Ways to Increase Conversion Rate
If your conversion rate is lower than Amazon’s average, there are quick ways to increase it. Here are some of them:
- Use the appropriate keywords for your product titles and descriptions.
- Highlight your product’s benefits in the product descriptions.
- Include photos that show how your product is used.
- Monitor your competitor’s prices and ensure you’re not too high or too low.
- Aim for your products to become Amazon Prime eligible.
- Encourage your customers to leave product reviews.
However, conversion is not the only important metric. It’s dangerous to be fixated on conversion without understanding the other metrics, especially those that relate to profitability.
Advertising Cost of Sales (ACOS)
Advertising Cost of Sales (ACOS) tells you how much ad spend you incur for every $1 revenue earned. This is a great metric to gauge how profitable your campaigns are. To calculate this, simply divide your total ad spend by the number of generated sales.
Target ACOS varies depending on your products and profit targets, but the general average for PPC beginners is 27%. This means an ad spend of $0.27 for every $1.00 sale.
How to Set the Right ACOS Target
Ideally, you’d want the lowest ad spend for the maximum revenues. This means finding the right target for your ACOS. To do this, you need to:
- Determine your target profit.
- Understand your break-even point.
What you spend for advertising should be less than your ideal profit margin. Your profit margin is the amount left after you’ve paid for all the general costs like shipping, salaries, and fees. You’d be better informed in deciding the right amount of ad spending when you know the other costs your business incurs.
Sometimes, especially when you’re introducing a product, you may have to spend more on advertising. You need to determine the break-even ACOS. This is the maximum amount you can spend on advertising without sacrificing product costs. You don’t suffer a net loss but also don’t enjoy a net gain.
Average Daily Impressions
An impression is sometimes called a view or a view ad. It is the moment a visitor views your ad on Amazon search results regardless of whether they click on it or not. You’re not charged for impressions, but they help you understand how well your ad is attracting customers.
You’d want your campaigns to have as many daily impressions as possible. This indicates that your ads are being shown to many potential buyers who are in various stages of their buyer journey.
In 2020, the average daily impressions on Amazon were at 101,265. This dropped to 40,000 - 60,000 in 2021. The increase in global online marketplaces due to pandemic restrictions has offered consumers more channels for online shopping.
This increased competition means fewer customers get to see your ads.
How to Increase Daily Impressions
Aiming for high daily impressions increases your product’s visibility. It’s important to have a lot because this will confirm if you’re using the right keywords, and they will help you further optimize your campaigns. To increase your daily impressions, you need to:
- Bid competitively and test if higher bids will lead to more impressions.
- Start with automatic targeting then refine further with manual targeting.
- Expand your keyword targeting criteria.
- Balance your keyword match types.
- Review your budget allocation and check which campaigns frequently run out of budget.
When you have a new product, it’s expected that paid strategy generates 90% of the daily traffic. However, as your product matures, you should execute more organic traffic strategies to increase your daily impressions.
Average Daily Clicks
From impressions, you’d want your customers to click on the ad and land on your listing page. Every time a customer clicks on your ad, Amazon charges you for that click. The average click per Amazon user per day is 382.
The more impressions your ads get, the more clicks you’d want them to receive. To achieve this, you should make sure customers quickly find what they’re looking for in your ads. Customers only have a split second to decide which among the different ads and organic search results they see is worth clicking on.
Always optimize your product title, product description, and product image. Include emotional and powerful words on your ads that create a sense of urgency and encourage the customer to click on the ad.
Average Daily Spend
The average Amazon seller spends $268.21 per day on ads.
If you’re just starting out, it can be confusing to determine how much you should spend on ads on a daily basis. The wise move is to start with an automatic sponsored product campaign with a competitive bid but for a minimal budget. As your ad starts to collect data, analyze its performance, and begin to optimize the ad.
You can increase your budget once you’ve optimized your ad.
To learn more about how to dominate your niche on Amazon using PPC campaigns, you can check out our ultimate guide here.
For advanced sellers, instead of focusing on daily spend, focus on ACOS instead. You should be aiming for a profitable or break-even PPC campaign. If you have one, then aim for the most impressions, clicks, and conversions as much as possible. The traffic generated by your paid campaigns would greatly influence your organic traffic.
Average Daily Revenue
The average Amazon seller earns $987.77 per day from their PPC campaigns.
This figure includes discounts, deductions, returns, and refunds and you’d need to subtract other costs to determine your net income. To increase this metric, you need to work on improving the ad impressions, clicks, and conversion rate.
Amazon advertising statistics only reflect the average performance of all Amazon advertisers. Your ad's performance can be vastly different depending on your product, niche, and target market.
When considering these metrics, it is important to strike a balance between impressions, clicks, and conversions and ensure that your overall business remains profitable despite spending on ads. Ultimately, the goal should be to depend more on organic traffic than paid traffic as the former is a more sustainable way of running an eCommerce business.
Frequently Asked Questions
Why is Amazon’s conversion rate so high?
Amazon’s conversion rate is better than other eCommerce websites because it has a consumer-centric convenience program. Amazon Prime offers huge perks to its members including free two-day shipping. This has greatly encouraged consumers to sign up and patronize Amazon for their online shopping needs. Amazon Prime conversion rates are the highest in the industry at 74%.
What percentage of eCommerce transactions is on Amazon?
Almost 50% of the US eCommerce market buys on Amazon. The company dwarfs the competition in terms of market share. Amazon’s market share in the US is 49.1%, a far cry from the 2nd largest platform, eBay, which has a market share of 6.6%.
Why is CPC high on Amazon?
CPC bidding is based on keywords and the more search volume a keyword generates, the more popular and expensive it gets. For example, a popular term like “adult diapers” will be more expensive than “incontinence pads” although both mean the same thing. Advertisers know that targeting popular keywords will increase the chances of their impressions and, hopefully, conversions. You can bid aggressively on popular keywords as long as your conversions prove that the CPC is worth it.