A big thank you to Dave O’Brien for providing a ton of content for this article on Amazon advertising. Dave is a great friend of the Daasity team, and If you’re looking for a true veteran working with you on your eCommerce and Amazon strategy, look no further than Dave and his agency, OTS Group Inc.

Let’s get right into it: strong ad performance is the only way to grow your brand on Amazon.

You will not only bring in revenue from the ads themselves, but you will help your advertised products organically rank higher. Products with the best sales numbers, the highest conversion rates, the most reviews, and the highest ratings are the ones you’ll see at the top of Amazon’s Search Engine Results Pages (SERPs).

In short, good Amazon ads pay dividends. 

But there is fierce and savvy competition on Amazon: you can’t guess your way to growth, nor can you post a few Amazon ads and bring renown to your brand. Unfortunately, you’ll just end up with a lot less money than you started with and little understanding of where you went wrong.

This guide will walk you through types of Amazon ads, how to use them, give you some tips for a successful Amazon advertising strategy, and help you grow on the world’s largest marketplace. 

Amazon ad types: what they are, where they appear, and how to use each

As of 2023, Amazon has three ad categories: 

• Sponsored Products
• Sponsored Brands
• Sponsored Display

There are four places you can expect to see them:

1. Amazon’s Home Page: All three ad types can appear in designated blocks on Amazon’s HP, which is personalized for each user. For this article, I used “pre workout” as a product example, clicked on Redcon1’s pre workout supplement, and encountered ads from Redcon1 both on-site and off-site (see #4 below):
   

2. Amazon’s SERPs: All three ad types appear throughout a search page, surrounding and among organic (i.e., non-paid) results.
3. Amazon’s PDPs (Product Display Pages): All three ad types appear in designated places on PDPs, and they can be ads from the same brand or from competitors.
4. Externally (i.e., on sites other than Amazon): Sponsored Display ads appear on other websites in designated ad slots—these often appear on news sites or Amazon owned/affiliated sites. Here’s an example of an external ad found on IMDB, which Amazon owns, again showing a pre workout ad from Redcon1: 

Now, let’s examine and analyze each of the ad types:

Sponsored Products

Sponsored Products are individual items that brands can pay to promote. Brands most often use Sponsored Products to acquire new customers, drive sales, and improve their Amazon SEO.

Below is a example of a typical Sponsored Products ad and what goes into it:

The highest volume of Sponsored Products can be found on SERPs, where they appear at the top and bottom of the page, as well as interspersed among the organic results. 

In recent months, Amazon has substantially increased the real estate it allots to Sponsored Products, particularly for the most competitive keywords. 

Sponsored Products on Amazon SERPs

At the top of many Amazon SERPs, there is a Sponsored Display ad (which I’ll cover in the next section), but below that, the Sponsored Products begin:

As you continue to scroll, there is a carousel for more Sponsored Products, categorized as “HIGHLY RATED.” Below these are more organic results:

What follows are more layers of organic results and full-row Sponsored Products offerings. Eventually, the searchpage ends, and you’ll encounter another carousel of Sponsored Products ads that are “Recommended based on your browsing history:”

Sponsored Products on Amazon PDPs

Carousels of Sponsored Products frequently appear on PDPs. In this case, I clicked on one of Redcon1’s pre workout supplements from an organic listing, and scrolled down the page.

The first carousel to appear included competitors’ pre workout supplements:

Near the very bottom of the page, Redcon1 had its own carousel:

How to use Sponsored Products + find keywords

Sponsored Products are fundamental to building and maintaining your brand recognition and presence on Amazon, but fundamental to the ads themselves is a well-considered keyword strategy. 

You have to do serious research on your product and product category in order to find relevant, specific, and high-intent keywords. To facilitate this process, I highly recommend AI platforms such as Sellozo and Heilium10 for keyword research and budget optimization (more on these tools later in the article).

If you start bidding on high-level and general keywords related to your product category or niche, especially if you’re not a large brand, you’ll blow through your marketing budget. 

For example, one of the brands I work with sells pet grooming products. While I started by bidding on some general keywords along the lines “dog brush,” using Heilium10 and Sellozo, I ended up finding the keyword “slicker brush” and included variations of that (e.g., “slicker brushes,” “slicker brush for dogs”), which were more successful.

• It’s also necessary to include negative keywords in your campaigns both to avoid running up your ad budget on tangential terms and to optimize for more successful terms. 

When it comes to cost, know that Sponsored Products’ CPCs increase with higher Amazon SERP positions. If you’re looking to appear at the top of the SERP for certain keywords, you can expect to pay significantly more per click. However, this may be worth it for you if you can retain your customers for years and count on significant customer lifetime value. Some of the most competitive keywords can cost over $100 per click.

Picking the right products to advertise as Sponsored Products 

One of the biggest mistakes you can make in your advertising strategy is picking the wrong products to advertise. 

What I recommend is that you pick your top 1-2 products and focus your Sponsored Products’ CPC dollars on them. These are your products that have the most reviews, the highest ratings, the highest conversion rates, and strong FBA Prime inventory.

You do not want to make ads for products that have a low conversion rate, unless you’re trying to launch a product. The most successful brands on Amazon are not trying to sell through their entire catalogs via Sponsored Products. They are optimizing their ads around their hero product(s), and they drive enormous volume: that’s how they hit their numbers. 

Sponsored Brands

Sponsored Brands ads allow brands to promote themselves, and you can think of them as the billboards of Amazon ads. 

Using Sponsored Brands ads, competitors cannot run attack ads on each other: one brand cannot assume the identity of another brand or otherwise bid on another brand’s behalf. 

There are three categories of Sponsored Brands ads:

Here’s a breakdown of the first type (product collection) as an example:

Sponsored Brands ads on Amazon SERPs

Now, let’s look at how these appear within Amazon. Using the example search from above for “pre workout,” Optimum Nutrition appears in a Sponsored Brands ad at the top of the page:

A few rows down on this SERP is a separate section for another type of Sponsored Brands ad: a video ad (bracketed in red). In this case, Redcon1’s video ad about their pre workout is featured:

At the bottom of the SERP, after more rows of Sponsored Products and organic results, there is a block called “BRANDS RELATED TO YOUR SEARCH.” In the block, three supplement brands are shown, including Optimum Nutrition for a second time (this is the other kind of Sponsored Brands ad, store spotlight):

Using Sponsored Brands ads

Sponsored Brands ads work best when you already have a presence on Amazon. When you’re established, customers will use Amazon as a search engine to find your latest products and otherwise explore your catalog.

Therefore, if you’re just starting out on Amazon, you’ll want more of your advertising budget to be dedicated toward Sponsored Product ads. As you grow, you can dedicate a larger percentage of your budget toward Sponsored Brands ads and start to bid on competitors’ branded keywords, to drive up their CPCs (after all, they will likely do the same to you). 

Sponsored Display Ads

Sponsored Display ads are a relatively new ad category, introduced at the end of 2021. Sponsored Display ads are Amazon’s form of retargeting ads, and they can appear on both Amazon itself and other sites (often, Amazon-owned sites).

Unlike with Sponsored Products and Sponsored Brands ads, you can’t bid on specific keywords for Sponsored Display Ads. Instead, you bid on placement opportunity, based on CPM and PPC. 

While you build the creative, Amazon will handle the placement of the ads. Their appearance can vary depending on where they pop up, but they generally include the following:

Sponsored Display Ads on Amazon SERPs

Interestingly, there was no left-side Sponsored Display ad on my “pre workout” search (even after reloading the page and trying an incognito window), so I searched for a different keyword, “cold brew.” 

In this case, I was shown a Sponsored Display ad related to fitness, which makes sense from a retargeting standpoint given my recent browsing for supplements for this article:

Sponsored Display Ads on PDPs

Sponsored Display Ads may also appear on Amazon PDPs. Here is an example of Optimum Nutrition’s popular Gold Standard Whey Protein PDPs:

On this PDP, one of Optimum Nutrition’s competitors, Naked Nutrition, has two Sponsored Display slots, featuring a couple different products. 

If there’s a chance that Amazon can gain some extra ad revenue and increase competition among brands, they will. So, from their perspective, the more ad slots they can fit on a PDP, the better. This is why you need to make sure that you’ve optimized your Amazon PDPs (but, that’s another article for another time).

Sponsored Display ads off Amazon

Some off-platform Sponsored Display ads will appear in the same format as they do on Amazon. Take, for instance, this ad featuring Naked Nutrition that I encountered on Goodreads: 

I’d also like to call attention to Sponsored Display ads that frequently appear on the streaming platform Twitch. Amazon has been heavily leveraging Twitch for ads, given the huge volume of Twitch users (at least 140m active monthly users in 2022). 

Sponsored Display ads that appear on Twitch may look like the previous examples, or they can be squeezed into different parts of the site. For example, Acer has the following ad on Twitch’s homepage:

Using Sponsored Display ads

Here are a couple of Sponsored Display ads’ main use cases.

1. Paid Cross-Sells

When they appear on Amazon, Sponsored Display ads allow for cross-selling of your product(s), both on your PDPs and your competitors’ PDPs.

Amazon automatically creates cross-sells and bundles based on customers’ buying behavior and product performance (in the PDP section entitled “Frequently bought together”), but you don’t have any control over this. 

By bidding on keywords and products (which you do using ASINs), you can have more power over where your product(s) pop up. 

• If you bid on your own ASINs, you can get cross-sells to appear on your own PDPs
• If you bid on competitors’ ASINs, you can conquest your competition and appear right below the Buy Box and “About this item” section at the top of a PDP.
  
  (In the Optimum Nutrition example earlier, two of Naked Nutrition’s products are shown at the top of the protein powder PDP. Naked Nutrition’s product under the buy box is a direct product competitor, but its product under the “About this item” section is a competitive cross-sell.)
  

2. New Product Introductions (NPIs)

A great use case for this Sponsored Display ads is for NPIs (New Product Introductions). Since you target ASINs or product categories, they're a great way to get the word out about your new products.

A word of warning on Sponsored Display ads’ cost

Be careful of ad spend and avg CPC for your Sponsored Displays. Depending on the products you are targeting, the ad spend can be greater than the conversion. Make sure you watch your max CPC.

A quick note on Amazon Ad variation

Amazon is constantly A/B testing where to put ads and how many ads they can show visitors without disrupting the shopping experience. They don’t want to overstuff their platforms with ads, but they want to find where the too-many-ads line is, and go right up to it.

As a result, you need to be aware of changes that Amazon is implementing that may affect your advertising performance. In general, you can expect that every quarter, Amazon will make some small changes to ads, and every year, there will be more significant changes.

How to measure your advertising success

On Amazon, TACoS should be your north star metric—and it is pronounced like the food.

TACoS stands for total ad cost of sale, and it measures how your ad spend impacts your total revenue, not only the revenue attributed to ad spend—this would be ACoS (ad cost of sale), which is the inverse of ROAS.

The reason I recommend TACoS for Amazon is because it includes your organic sales performance on Amazon, too. Given that successful advertising helps organic ranking on Amazon, it’s important to factor in everything to indicate your overall performance. 

To calculate your TACoS, divide your total ad spend by your total revenue, and multiply the result by 100:

My best advice for your Amazon advertising strategy

First and foremost: be willing to invest in order to learn, get the data you need, and use the tool(s) that will help

At this stage of Amazon’s maturity and saturation as a marketplace, you need to be ready to make a fairly substantial monthly investment in order to learn, test, grab data, and see how your brand performs among competitors. 

I recommend spending $5,000 to $15,000 per month as you begin testing ads. 

• This should factor in at least one tool to help you optimize your ads (see next section). 
• From an on-platform spend standpoint, this budget will allow you to start carving out your place in your vertical(s) and figure out where you stand.
• If you’re new to Amazon, and especially if you’re trying to save money, stick with bidding on your branded terms, to target people who are already searching for your product. If you start by going after competitive keywords, you’ll find you can spend a ton of money, fast. 
  

However, as a caveat to that third point, if you don’t have an established brand on an eCommerce platform (i.e., your Shopify or Magento store), don’t assume that you’re going to be able to sell on Amazon unless you’re the only person making a particular type of product.

You’ll be competing against the largest brands in the world, and without an established brand presence, you simply will not win when going after competitive keywords. If you sell coffee, you’re going to be competing against multi-billion dollar brands like Starbucks, Dunkin’, and Lavazza.

Given that those brands have nearly unlimited budgets (or what may seem unlimited in comparison to a smaller eComm brand), you don’t want to try to outbid them. 

In a sense, the first step toward selling on Amazon for many brands is growing your brand off Amazon.

Rely on AI-powered Amazon advertising assistant tools

A part of your budget must include the use of an Amazon tool. Tools like Heilium10 and Sellozo will find the best keywords to bid on for your products and automatically optimize your spend, day and night.

All of your serious competition on Amazon is using these. 

Without them, you’re going to be spending many hours every week trying to find your best opportunities and work on your ad spend, which is time that can be leveraged elsewhere in your marketing and advertising—for example, working on your ad copy and creatives. 

And, even if you are spending those hours a week looking for opportunities, you will not be able to sift through as much data and find the opportunities and make the changes that the tools will. 

They’ll be your new favorite work assistants–who work 24 hours a day.

Saturate for success: use every ad type

A part of your journey of advertising on Amazon will be figuring out the balance of ad types that work best for your brand–as with most things, this will vary for every brand, but what I can say is that you should invest in all three ad types. 

Ideally, you can successfully saturate a particular Amazon SERP, that is, you have ads of all types showing up, which will build the associations between your brand and the particular keyword. 

Build and use LPs for your most important keywords

Within Amazon, you can build your own microsite and LPs that you can route people to from your ads. 

Getting your in-Amazon site optimized and how to go about it is a separate discussion, but I do want to call attention to LPs, because they will absolutely increase your conversion rate from Amazon ads. 

I recommend building LPs based on the main assets that you show in your Sponsored Brands ads. Some brands will have a beautiful product image in their Sponsored Brands ads, but the image will lead to their microsite home page, which is a miss and deviates a potential customer from their research and buying experience. 

If someone has clicked on an asset, it’s likely they are interested in the product they see.

Caraway does a great job of this in their Sponsored Brands ads. When you click on the main asset shown in their ad, it brings you to an LP about that product (their Fry Pan), filled with other images and information about the product. The following two images are the flow from ad to LP:

Putting in the extra resources and effort to create experiences around each ad will be hugely beneficial to you in both the short- and long-run. It will increase conversion rates and sales, which will increase organic rankings, creating an Amazonian virtuous cycle.

Be thoughtful about video production

As with the well-considered ads-to-LPs strategy, I recommend spending a lot of time thinking about video ads (if you choose to make them), and how you can make them as targeted as possible. 

If you can make your video ads match particular keywords as much as possible, they will catch potential customers’ eyes and prompt them to watch your ad. 

For example, I searched Amazon for “Japanese bonsai spruce tree kit,” which is a specific query that only someone with an exact product in mind would search for. But a product video that came close to my search did come up:

If I were actually in the market for this type of kit, I would likely click on this ad. So, this brand did a great job of targeting keywords and phrases that are germane to their product offering. 

The end and the beginning

I hope you found this article informative and helpful, whether you’re just getting started with Amazon advertising, or you’ve already begun to build your brand. 

Good luck!