Why Should Amazon Sellers Invest in PPC?

When people think of investments, putting money into online marketplace advertising is probably the last thing that comes to mind – even for such a large business like Amazon.com.

But in fact…we believe that the Amazon PPC advertising money should be treated precisely as a short-term investment.

Wikipedia defines investment as follows: “An investment is an asset or item acquired with the goal of generating income or appreciation.” How does this relate to advertising your products on Amazon.com?

For one — the fact that you’re selling on the Amazon (and especially if FBA) is already an investment in itself. Assuming you’ve done it solidly and your product now gets its sales, investing a wee bit more into its PPC simply follows the suit.

Investing into what, again?

What is the asset that we acquire? Well, it’s the audience’s attention of course. Thanks to how Amazon’s algorithm works — this goal is not actually immediately achievable. Due to the innate system lag (with changing values like BSR or keyword ranking), the full effect of putting money into a PPC does not get manifested via increased sales right away.

In fact, it’s only after 3-4 weeks that the new attention level (an asset) settles within  Amazon’s ecosystem.

And it is then that this investment truly starts to pay off. It starts to multiply your product sales via a flywheel effect (income). If your product (and the way you’ve built its Amazon listing) is well accepted by the audience and wasn’t on the top of page 1 search results — it WILL get more attention and more sales due to ads showing at better positions. Some of this attention (if the keywords were relevant and good) will start to generate extra sales. And this is where the algorithm starts working for you via the Best Seller Rank.

Commitment that pays off because of the Amazon A10 Algorithm

The more you sell – the better your BSR will be (the number itself gets smaller as your product approaches position 1). A better BSR is accounted for by the algorithm with every Sponsored AND organic search result. So a good PPC Campaign with a sufficient budget can literally send your product into a series of decreasing strength sales improvements, both from ads and organics.

Albeit this effect was more pronounced before the Amazon algorithm changes made in Autumn 2019, but its effect is still substantial and definitely worth investing in.

Truth be told — you could potentially achieve the same multiplication result if you induce extra sales from any source:

  • Thematic blog articles with good upsell
  • FB/Insta advertising
  • Google Ads lead generation
  • QR codes in some fancy printables, etc.

And don’t get me wrong — an investment into making interesting-to-read blog articles or a landing page + strong Google Ads support can be as effective for your business as Amazon advertising. Amazon PPC investment is simply less of a hustle than all above. And it works most of the time if done with a knowledge of the system.

For example, you could leverage the knowledge of how to build an effective Amazon PPC Sponsored Campaign for external services like Profit Whales Zero to Hero.

This service is an online tool that quickly generates a ready-to-go Amazon PPC campaign in just a few hours and after only 10 minutes of setup.

The software will intake a few keywords and a PPC budget from you, scan your listing, your niche competitors, and a bunch of external API, and generate a tailored set of PPC campaigns that will be uploaded to your Seller Central and launched the moment they are ready.

Is there another way to invest into Amazon sales?

By all means, try out ALL sales multiplication channels. See firsthand what works for you. And when you do find your best, focus on it for a few years to come – and make it perfect.

From my firsthand work experience with our clients, there is no one-size-fits-all solution. Things like Viking-style jewelry are best sold (on Amazon) via the creator’s blog. Heavyweight training equipment sales surge every time their creator posts a new recommendation on Facebook. Top sellers of ping-pong rackets… well, they can certainly benefit.

The same was true for a furniture appliance bulk seller and a dog training equipment seller. And they all tried and tested many channels before focusing their investment on the best performing one.

ROI measurability

A good investment is always measurable.

And Amazon Seller Central does a great job of providing exactly that. It supplies sellers with a highly accurate analysis of how effective the investment was and is over any length of time.

Return on investment is easily calculated by the formula:

ROI = Total Sales – Cost of Goods purchase – Shipment Fees – Amazon Fees – FBA Fees – Amazon Ads Spend. And all (but two external) values are readily available at a moment’s notice from the Seller Central.

Risky and safe strategies in Amazon PPC investment 

And when it comes to the risk nature of investment… well, even the Seller Central Advertising Manager lets you manage your investment risk level by implementing a particular PPC strategy:

Aggressive PPC 

If you have a strong product that rivals your Top competitors in product quality, customer reviews, and sales figure — you can get really bold and invest in capturing the Best Seller or Amazon’s Choice badges. To do this usually requires, amongst other things, a serious scratch of PPC budget, along with a set of lightning deals and discounts to capture and hold a best-selling position long enough (3-4 weeks at least) for the algorithm to take note of you.
This is worth it solely for the reason that those with a Best Seller or Amazon’ Choice badge can see their sales double and ACoS drop 10-20% almost immediately. Which is definitely a worthy investment opportunity.

This approach works well if applied to highly seasonal products 3-4 weeks before the sales begin, like Halloween costumes or Xmas toys.

Assertive PPC

If you don’t feel like going all-in – you can still probe your product niche aggressively. An assertive PPC campaign will have a wide sweep on the available and new keywords and other targeting options to firsthand cherry-pick out those that do not generate stable, low-cost sales.

Arriving at this cherry-picked only PPC Campaign is a no small task, but if you can — you will be rewarded with having a well-structured and proven machine that takes in your investment and multiplies your revenues by a predictable and accountable margin.

Minimal Risk PPC & protection

If you don’t want to risk any loss with your investment, in the long run, you could always take careful probing tactics in your PPC investment. For this, you can go for Sponsored Product only Campaigns (as generally, they are the least costly ones).

Start by targeting your own brand-name keywords. Target:

  1. a) weaker competing products;
    b) strong complimentary products by their ASINs. Try low-bid automated advertising.

Cherry-pick only the long-term, well-performing search terms from your Search Term Report and use them in “exact only” campaigns to arrive at a sweet spot bid/ad sales balance for every such keyword a few at a time. This approach will give you fewer sales than any other, but you can rest assured that the ROI on this investment could be anything from 20-50% and upwards with minimum risk.

Can Amazon PPC investment be long-term?

Actually…remember we mentioned that investing in Amazon PPC is a short-term investment?

Well, most of the time it is…but not every time. On three specific occasions, we’ve observed a very strong effect of selling (and advertising) a product at a loss for up to nine months a year (due to too high ACoS).

And again, we have Amazon’s search algorithm to thank for this. The system always gives higher BSR and search term ratings to products that continuously run their ads and sell at something on Amazon at all times.

And selling something like wallpaper world maps at 60-80% ACoS nine months out of 12 – can pay off in the remaining high season, as this costly investment actually taught Amazon that your product is the best and should be shown on top of page 1.

So when the demand surge comes – guess which people will start buying from the top of the Search Results page? This is when your total annual ROI can go through the roof and get you 400-500% profit, depending on the year.

And these are my thoughts on investing in Amazon PPC. What do you think? Is this an investment in your vocabulary? Is it something you would spend your time studying? Write us what you think in the comments below!

And as always: good hunting to you all, fellow Amazonians!

Ihor Dubovetskyi
Co-founder, Profit Whales

Ihor Dubovetskyi is the co-founder of Profit Whales, the accelerator for Brands selling on Amazon based on advanced decision-making technologies using Big Data & Data Science.

Ihor is obsessed with scaling brands beyond their expectations and building tools that will help Brands on Amazon to scale faster more efficiently.