How Do Amazon Ads Work? Beginner’s Guide to Amazon PPC

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How Do Amazon Ads Work

How do Amazon ads work, and can they really amplify my product visibility? The answer lies within the realm of Amazon Pay-Per-Click (PPC), a powerful advertising model that can skyrocket your products to prime digital real estate.

This beginner's guide to Amazon PPC will demystify the intricacies of Amazon's advertising engine. We'll break down the different ad formats, explain the bidding process, and illustrate how strategic keyword use can lead to your ad appearing in front of the right customer at the right time. 

Dive in as we provide you with the know-how to make Amazon's algorithm work in your favor. 

Understanding Amazon Ads

Amazon Ads are a powerful tool for businesses to promote their products and increase sales on the Amazon platform. By using Amazon Ads, you can target potential customers with relevant ads and increase your product visibility. In this section, we will discuss the different types of Amazon Ads and how Amazon uses customer data to make these ads more effective.

Types of Amazon Ads

There are three main types of Amazon Ads: Sponsored Products, Sponsored Brands, and Sponsored Display Ads. Each type of ad has its own unique features and benefits.

  • Sponsored Products: These ads are pay-per-click (PPC) ads that appear in search results and on product detail pages. They are designed to promote individual product listings and can help increase visibility and sales for specific products.

  • Sponsored Brands: These ads feature your brand logo, a custom headline, and up to three products. They appear at the top of search results and can help increase brand awareness and drive sales.

  • Sponsored Display Ads: These ads target customers who have already shown interest in your products or similar products. They can appear on product detail pages, customer review pages, and even off-Amazon websites.

How Amazon Uses Customer Data

Amazon uses customer data to make their ads more effective and relevant to potential customers. They collect data on customer search queries, purchase history, and browsing behavior to create targeted ads that are more likely to result in a sale.

For example, if a customer has recently searched for a specific type of product, Amazon may show them an ad for a similar product from a different brand. Or, if a customer has previously purchased a product from your brand, Amazon may show them an ad for a related product.

Managing and Optimizing Campaigns

When managing and optimizing Amazon ads campaigns, there are a few key strategies and performance metrics to keep in mind. By monitoring these metrics and making adjustments to your campaigns, you can improve your ad performance and get the most out of your ad spend.

Performance Metrics

One of the most important metrics to track is your Advertising Cost of Sales (ACoS). This metric represents the percentage of your sales revenue that is spent on advertising. A lower ACoS indicates that your ads are generating more sales for every dollar spent, while a higher ACoS may indicate that your ads are not performing as well.

Read our article: What Is A Good ACOS For Amazon PPC to learn more about ACoS for Amazon ads.

Another important metric is your click-through rate (CTR). This measures the percentage of people who click on your ad after seeing it. A higher CTR indicates that your ad is more relevant and appealing to potential customers.

Conversion rate is also a key metric to track. This measures the percentage of people who actually make a purchase after clicking on your ad. A higher conversion rate indicates that your ad is effectively driving sales.

Also read: What Is a Good Conversion Rate for Amazon?

Optimization Strategies

To optimize your campaigns, you can make adjustments to your ad targeting, bidding strategy, and ad creative. By targeting the right audience and bidding strategically, you can improve your ad performance and generate more sales.

You can also experiment with different ad creatives to see what resonates best with your target audience. This could include testing different images, headlines, and product descriptions. Read more about optimizing your Amazon ads here: How To Optimize Amazon PPC Campaigns

Finally, regularly monitor and adjust your campaigns based on performance metrics. By keeping a close eye on your ACoS, CTR, and conversion rate, you can make data-driven decisions to improve your ad performance and drive more sales.

Amazon PPC Bidding Process Explained

One of the core elements of Amazon PPC is the bidding process, which operates much like an auction. But instead of antiques or artwork, you're bidding on keywords—terms that potential buyers are likely to use when searching for products like yours. Understanding this process is critical to ensuring that your ads appear where they'll be most effective, without overspending on your campaigns.

How Bidding Works on Amazon

When you set up an Amazon PPC campaign, you select keywords relevant to your products and then place bids on them. Your bid is the amount you're willing to pay every time a shopper clicks on your ad. The higher your bid, the better your chances of winning a higher ad placement.

However, it's not as simple as just outbidding the competition. Amazon also takes into account the relevance and quality of your ad. This means that even if you are not the highest bidder, you could still win the top ad placement with a well-optimized ad that's highly relevant to the search query.

Types of Bids in Amazon PPC

  • Manual Bidding: As the name suggests, this involves setting your bids manually for different keywords. It gives you greater control over your campaigns, allowing you to adjust bid amounts based on performance.

  • Automatic Bidding: With automatic bidding, Amazon sets bids on your behalf, using machine learning to target keywords based on the content of your product listing and other factors. It's a great way to discover new keywords you might not have considered.

  • Dynamic Bidding: Dynamic bidding strategies adjust your bids in real-time. Two options are available:

    •   Down-only: Amazon will lower bids if your ad is unlikely to convert to a sale.

    •   Up-and-down: Amazon can increase your bid (by a maximum percentage that you set) if your ad is likely to convert, or reduce it if it's not.

Bidding Strategies and Considerations

Setting the right bid requires balancing the cost you're willing to incur for clicks against the potential revenue those clicks could generate. You also need to consider:

  • Product Margins: Higher-margin products might justify higher bids, whereas lower-margin items may require a more conservative approach.

  • Keyword Competition: High-competition keywords generally require higher bids to remain competitive.

  • Campaign Objective: If your goal is brand awareness, you may bid aggressively. For profitability, you might focus on high-converting, low-competition keywords.

  • Seasonality: Bid adjustments may be necessary during peak shopping periods or off-season times.

Understanding and mastering the bidding process can take time, but it’s a critical component in optimizing your Amazon PPC campaigns. 

Remember, a successful Amazon PPC strategy is not just about how much you spend but how wisely you spend it.

Pricing and Budgeting

Cost Structure

Amazon ads operate on a pay-per-click (PPC) model, which means that you only pay when someone clicks on your ad. The cost per click (CPC) varies depending on the competition for the keywords you are targeting. The more competition there is, the higher the CPC will be. Amazon uses an auction system to determine which ads are shown to shoppers, and the highest bidder for a particular keyword will have their ad displayed.

In addition to the CPC, there is also a minimum daily budget of $1 for Sponsored Products and Sponsored Brands ads. This means that you must set a minimum budget of $1 per day for your ads to run. However, it's important to note that this is just a minimum and you may need to set a higher budget to see significant results.

Budgeting for Ads

When setting your budget for Amazon ads, it's important to consider your overall advertising goals and the potential return on investment (ROI) for your products. You can set a daily budget for each campaign, as well as a total budget for the entire campaign.

One way to determine your budget is to calculate your target ACoS (Advertising Cost of Sales). ACoS is the ratio of ad spend to sales generated by the ad. For example, if you spent $10 on ads and made $100 in sales, your ACoS would be 10%. You can use this metric to determine how much you are willing to spend on ads to achieve your desired ROI.

Another factor to consider when budgeting for Amazon ads is the seasonality of your products. If you sell seasonal products, you may want to increase your budget during peak seasons to take advantage of increased demand.


Mastering Amazon PPC is a journey of continuous learning and refinement, and the bidding process is a crucial step in that journey. As you become more familiar with how Amazon ads work, you'll be better equipped to craft campaigns that not only reach your target audience but also deliver a strong return on investment. Keep experimenting, analyzing, and optimizing, and you'll find the sweet spot where visibility and profitability intersect.

If you're ready to elevate your Amazon advertising strategy and want to gain a competitive edge, Scale Insights is here to help. Our advanced PPC tools are designed to simplify campaign management, allowing you to focus on growing your business while we take care of the complexities of ad optimization. Take the first step towards PPC mastery and discover how Scale Insights can streamline your ad campaigns for maximum impact.

Frequently Asked Questions

Is it worth paying for Amazon ads?

Yes, it can be worth paying for Amazon ads. Amazon ads can help increase your product's visibility and drive sales. However, it is important to carefully consider your advertising goals and budget before investing in Amazon ads.

How are Amazon ads paid for?

Amazon ads are paid for on a cost-per-click (CPC) basis. This means that you only pay when a shopper clicks on your ad. The amount you pay per click is determined by a bidding system, where you set a maximum bid for your ad placement.

How does Amazon display ads work?

Amazon display ads are shown to shoppers who are browsing or searching for products on Amazon. These ads can appear on product detail pages, search results pages, and other Amazon pages. Amazon uses data to target these ads to shoppers who are most likely to be interested in your product.

How much should I spend on Amazon ads per day?

The amount you should spend on Amazon ads per day depends on your advertising goals and budget. Amazon recommends starting with a daily budget of $10-$50 and adjusting your budget based on your advertising performance.

Are Amazon ads pay-per-click?

Yes, Amazon ads are pay-per-click. You only pay when a shopper clicks on your ad.

What is the minimum budget for Amazon ads?

There is no minimum budget for Amazon ads, but Amazon recommends starting with a daily budget of $10-$50. Carefully consider your advertising goals and budget before investing in Amazon ads.