How Amazon Keyword Search Ad works ?

Amazon search ads are similar to Google ads but just that, in most of the case you’ll have users logged into the system before they see the ads.

How does it work ?

Let’s say you’re a seller on Amazon and you have different product categories. You notice that, one of the product category is not selling as expected and you decide that you want advertise for that product.

In Amazon whenever user searches for the products, relevant products are shown in the results. Along with that, Amazon also shows ads relevant to the keywords users are searching for.

This is what you as a seller will be targeting.

In the above case, Apple has bid for the the keyword “smartphone”. You can see Apple ads on first fold and in first two results.

This is important because people are most likely to click on first few results. If your product doesn’t appear in the first fold, you are most likely to miss the customer attention.

There will be multiple sellers targeting the customers for their product. In that case whoever bids highest price for the keyword, their product appears on the top.

The Process

  1. Decide on list of products you want to advertise.
  2. Generally people will create campaigns for each category of products and run different ad groups within the campaigns. For example, you can create a campaign for all Smartphones category and create Adgroup for each of the smartphone available. So, campaign name will be “All Smartphones”. Adgroup1 will be “iPhone 11 Pro Max 16GB”. Adgoup2 will be “iPhone 11 64GB” etc
  3. Collection of keywords – When you are starting with ad campaigns you’ll have to come up with relevant keywords, which you’ll use in bidding. This will be a difficult task initially. You can use private tools like Helium which help in collecting the keywords used by competitors. Alternative way is – you let Amazon decide the relevant keywords for your product. This is easy. While setting up the ads if you chose automatic campaigns, then amazon will take care of the keywords. This is not optimised though.
  4. Campaign Optimisation – it is not enough if you just set-up the ad and let it run on its own. Best practice is to let it run for a week and see the performance. Amazon lets you download the report of search terms. You can check this report and identify list of keywords used by users and their performance. You can identify the keywords that are not performing well and remove them. Once you are comfortable with the process you can run manual campaigns as opposed to automatic ones.
  5. Weekly performance – Initially you might have to check the campaign performance on weekly basis and optimise them accordingly. After few iteration you can change to monthly performance check.
  6. Bidding Prize – You need to keep an eye on bidding prize of each keyword. If you keep amount very high you’ll end up spending lot of money but you’ll get sales. If you bid lower amount, no one will see your product.

Reducing ACoS

The whole purpose of Amazon ad optimisation is reducing ACOS. ACOS is Advertising Cost Of Sales, Which means total cost involved in advertising the product compared to total sales generated by that product.

For example assume you had a product worth 500 Rs and you spend 100Rs on advertisement for that product . Let’s say you were able to sell two product for 1000Rs, then to sell product worth 1000Rs you have spent 100Rs. Your ACOS will be 100/1000 = 10%.

If your actual profit margin is 25%, by advertising on amazon, you brought down your profit margin to (25% -10%) 15%. This is fine. You should make sure that your profit margin is not completely eaten up by ACOS itself. That’s why, money spent on ads while bidding matters the most.

You can build Machine Learning models to predict best performing keywords which will help in ACOS Optimisation.

Conclusion

  • Ads are important. If your product doesn’t appear on the first page of search result, you have less chance of selling.
  • You can control the placement of ads against competitor by bidding higher amount for the keywords.
  • If you don’t keep an eye on ACOS, your ads will eat up all of your profits.