Understand Amazon Keyword Bidding: What Is It & How Does It Work?
Explore the secrets behind Amazon advertising services and understand how they can benefit your Amazon business. Keep reading to find out!
Ever since its introduction in 2012, Amazon’s ad-selling services have been a reliable option for any seller wishing to expand its customer base, double down on its visibility, and increase the conversion rate in general.
However, not many people are aware of the working mechanism behind Amazon PPC campaigns, leading to otherwise avoidable mistakes. If you strive for effective ad placement, it is worth knowing how your ads are arranged by the platform’s algorithms.
Check the article below to see what makes Amazon ads function the way they do!
What Is Amazon Keyword Bidding
Amazon bidding is based on an auction format, where retailers would bid a certain amount of money over specific terms and phrases that they believe will best match the shopping behaviors of the target audience.
This is mainly because the number of stores wanting to use the exact keywords happens to be massive all the time. Given the stiff competition on Amazon, you can only imagine why Amazon decides to deploy a bidding structure that allows it to pick out the winner.
While it sounds straightforward enough, there are various factors at play that can determine the outcome of each auction.
How To Win Amazon Keyword Bidding
Those who wish to select certain keywords for their Amazon PPC campaign would have to offer the biggest sum of money. But they do not necessarily have to pay as much as they proposed in the first place.
This is because Amazon applies a second price auction format, which means the highest bidder only has to pay 1p more than the second-highest one. This helps to minimize the costs involved for businesses while still ensuring unbiasedness.
For example, you bid $1.5 on the keyword “fashion earrings” while another competitor can only go for $1. Subsequently, you emerge as the winner and are afforded the first ad display on the search result page.
And the best thing? You are required to pay a mere $1.1 for each time a potential buyer clicks on your sponsored content, not $1.5 as originally expected.
So, what about the rest of the bidders? The second highest bidder right behind you will end up with the second ad display, and the third-highest bidder gets the third ad display, etc. This goes on until all the ad spots are fulfilled.
However, you should remember that while the financial aspect plays an important role in regulating the activities of Amazon bidding, it is not the sole drive.
Though not officially acknowledged, various digital marketers have put forward the idea that Amazon also takes SEO and sales records into account when choosing the winner.
Therefore, while putting in as much money as your budget allows is undoubtedly useful, do not forget to take care of other elements that may contribute to Amazon’s decision-making process.
Types Of Amazon Keyword Bidding
Instead of providing retailers with one single bidding option, Amazon presents three different choices that fit the needs and characteristics of each campaign.
Down-only dynamic bids
Down-only bids grant Amazon the right to reduce the initial money you bid on the keywords if your ads happen to be underperforming. While this can move your sponsored content further down the search result page, it ends up saving you money in the long run.
Inexperienced businessmen heavily favor this approach as it is the safest compared to the other two. If you are concerned about lowering your ACoS and/or being on a tight budget, going for down-only bids is highly recommended.
Still, it does not mean you should turn to down-only bids every time you run a campaign. If your ads do not get as much exposure, you are not likely to gain any new conversion and fail to boost the ad sales.
Up & down dynamic bids
Up & down bids are more flexible, as it enables Amazon to both downgrade and upgrade your bid. While the former is exactly the same as down-only bids, the latter only happens if the algorithms sense a reasonable performance from your ads.
For instance, you only manage to secure the fourth spot on the search result page with a $2 bid. But you still gain up to hundreds of clicks per day and an equally high conversion rate.
Upon realizing this, Amazon will increase your bid (the maximum is 100%), thus moving your ads up to the third, second, or even the first spot.
Up & down bids are preferred mostly by big brand names or well-trained stores with first-hand experience in ad running, as they can deliver resounding outcomes. That being said, the cost for up & down bids can spiral out of control, especially when your ads are doing better than expected.
So, if you have a cap on how much money to spend on an Amazon campaign, up & down bids might not be your best bet.
Fixed bids are the most traditional bidding approach that the majority of sellers are familiar with. As the name already indicates, fixed bids mean your money stays at the same level regardless of how well your ads perform.
The prospect of having more or fewer conversions does not affect your bid, which means you have total control over the entire process. If you are not a risk-taker and would want to keep things in check, fixed bids are an ideal choice.
Even if you have understood the basic concept of Amazon bidding, it is still a challenge trying to apply it in real life. So, why waste your time and effort when you can ask for a helping hand from Olifant Digital?
With years of experience in the field, rest assured that the agency is more than willing to provide you with detailed assistance on how to make the best out of Amazon ads. Check it out now and see for yourself!