Defining Amazon Sponsored Products TerminologySeller Labs
Chances are you’ve heard how important the Amazon Sponsored Products advertising platform is for boosting sales. Sponsored Products can dramatically improve the presence of your products on Amazon and increase sales. We wanted to provide you with an Amazon Sponsored Products terminology list before diving head first into the program and finding yourself neck deep in terms you’ve never heard before.
Terminology to Help you Understand Campaign Organization
This is done on the campaign level. You can choose between automatic and manual targeting.
A default bid is the dollar amount you are willing to spend on an ad. This is done on the ad group level. You can also specify the bid on individual keywords. If you decide to create an ad group then you’ll need to add your own list of keywords.
This is the term used for a grouping of products. Think of campaigns as a logic unit of things you want to bid on. You can specify your targeting type on the campaign level and on your daily ad budget.
Ad groups exist within a campaign. Think of an ad group as a container or an arbitrary grouping used to divide a campaign into smaller, manageable pieces. You will need to specify a default bid at the ad group level.
Whenever we talk about a keyword in the context of Sponsored Products, we’ll also be referring to its match type. Keywords become more nuanced as you dive deeper into Sponsored Products. You can use the keyword “Water Bottle” with a broad, phrase and exact match type. All three versions of “Water Bottle” serve a different purpose, though. These keywords are created inside of an ad group. The keyword “Water Bottle” might have several user search terms rolled into the top-level keyword.
User Search Terms
The user search terms are the words that shoppers are inputting into Amazon search. Amazon will then match up user search terms with keywords to display the most relevant products. This is where the different match types coincide with different versions of keywords. Remember, you want to use the term ‘keyword’ in relation to a match type because there can be multiple user search terms within a keyword.
A product ad is a combination of the title and image for an ad. When Amazon displays an ad, it is showing a product ad.
Terminology to Help You Understand Sponsored Products Reports
An impression happens when Amazon shows your product ad on the screen to a shopper. The main places where impressions happen are on either a search results page or on a product detail page.
A bid is the maximum dollar amount you are willing to spend per ad click. In order for a product to be displayed on the screen, a keyword needs to be bid upon for that product. The bid determines whether or not the ad will be shown. Traditionally, a bid needs to be higher than most others in order to be shown but the highest bid doesn’t always win. Remember, Amazon is always trying to sell a product; any ad revenue is extra. Amazon will match the best ad copy with the right keywords in order to make a sale. Amazon only charges you a penny above the person below you on a click.
When an ad is displayed (impression) and the shopper clicks on it then this metric appears for the ad. Amazon charges you whenever your ad receives a click. Sponsored Products is currently just a pay-per-click advertising platform at the moment. You are charged if somebody clicks on your ad regardless if they purchase or not.
Click-Through Rate or CTR is a metric defined by dividing the total number of clicks an ad receives by its total number of impressions. CTR is usually displayed as a percentage. For example, if you have 1,000 impressions and 10 clicks, you would have a 1% click through rate. Most click-through rates are below 3%. Extremely targeted terms receive higher click through rates, usually around 5%. Most broad match-type targeted keywords have a CTR below 1%.
Cost is defined when a user clicks on your ad and you get charged for the click. You may set a $1 bid for an ad but each click may only cost you 10, 20 or 30 cents. The actual amount you’re charged will be less than your bid. Your cost is the sum of every individual click.
Cost Per Click
Cost per click or CPC is calculated when Amazon takes the sum of all of your costs and divides them by the sum of your clicks to give you an average number. This is helpful in determining how much you can spend as well as ad ROI. Currently, sellers aren’t able to see the cost of every single click, so they have to take Amazon’s word about the cost.
Conversion happens when a shopper has purchased your product after clicking an ad for it. A conversion means your ad received an impression, a click, you were charged for the click, and the shopper finished by purchasing your product. Conversions are calculated on a per user basis, not sales. For example, if a shopper clicked on your ad and then purchased two of your advertised products, this would count as one conversion. Conversions aren’t so simple, though. Shoppers click ads all of the time and don’t purchase right away. Amazon measures three types of conversions: 1. A conversion within one day, 2. A conversion within seven days, 3. A conversion within 30 days. Your 30-day conversion rate will always be greater than or equal to your seven-day conversion rate. And your seven-day conversion rate will always be greater than or equal to your one-day conversion rate.
Sales or Revenue
Sales or revenue is calculated when someone sees your ad, clicks the ad, and then makes a purchase of the product. Product prices change frequently. So sales and revenue is everything attributed to your ad and the dollar amount that it sold for. Sales revenue takes into account the sales of multiple products in one transaction—unlike the conversion metric.
This metric is calculated by the number of conversions divided by the number of clicks an ad receives. For example, if you had 10 clicks on an ad and two people converted, that would be a 20% conversion rate. Conversion rates are always measured by one-, seven- and 30-day conversions.
Advertising Cost of Sale
The Advertising Cost of a Sale (ACoS) is an Amazon-invented metric. ACoS is probably the most used metric sellers use to determine if an ad is successful or not. ACoS measures the sum of all your advertising costs and divides them by the number of sales an ad generated. For example, if you spent $50 on advertising and you sold $500 worth of goods, your ACoS would be 10%. Amazon uses this metric to give sellers an advertising cost on a per unit level. This metric gives sellers a simple way to see how much they are spending on ads in relationship to a sale. ACoS takes into account conversion rates, bids and costs. It gives you a holistic view as to whether an ad is successful.
Cost Per Sale
Cost Per Sale (CPS) is the amount of money you’re spending to generate a single sale. Those familiar with Google AdWords are probably familiar with Cost Per Action (CPA), CPS is similar because an action on Amazon typically means a sale. The Cost Per Sale is similar to ACoS because the metric is calculated by adding the sum of all of your sales divided by the sum of all your advertising costs in order to get an average Cost Per Sale. The CPS is displayed in a dollar amount instead of a percentage. Be aware that not many people use this metric; ACoS is typically the preferred metric to determine an advertisement’s success.
This is a dollar amount suggested by Amazon for a keyword in order to win the ad auction. This metric takes into account the number of competitors and their bids for a keyword. The amount Amazon suggests is relative because you don’t have to bid the suggested amount. You can either bid more than, equal to, or less than what Amazon suggests. If Amazon suggests 50 cents and you bid $1 you won’t necessarily be charged $1 if someone clicks on an ad you’ve won. You could be charged 45 cents. The suggested bid helps sellers get into a range of max exposure, especially if your ad is relevant.
As you dig deeper into Amazon Sponsored Products you’ll start to contextualize the definitions of the terminology presented. We’ve developed a software application to help you sell more on Sponsored Products. It’s called Ignite and it has been developed to simplify and automate elements of your Sponsored Products campaigns. We’re currently accepting a limited number of sellers but you can get in the priority line by joining our waiting list.
Connect with Seller Labs