Some Amazon third-party sellers are familiar with Product Ads, which run on the Amazon.com website and click through to a seller's standalone website. But what can sellers do to get their products to stand out amongst a sea of products on the Amazon site itself, especially if competing products push their listings down several pages below a typical user's patience level?
Amazon's "Sponsored Products" ad program, still relatively new, is one solution. EcommerceBytes spoke to one of the early adopters of this Pay-Per-Click ad service, Moshe Melamed, co-founder of modern-furniture retailer LexMod.com, to see how the service was working for him and his campaign strategies. Read on for tips on taking advantage of this new type of advertising on what has been called the "Earth's Biggest Store."
Product Ads vs. Sponsored Products
Amazon Product Ads are links to products available from other websites, while Amazon Sponsored Products are advertisements that are matched to the products on Amazon.com. As Amazon explains, "Promote the products you sell on Amazon.com with keyword targeted ads. Pay only when your ad is clicked."
"We've been using Product Ads for over a year now and Sponsored Product ads for about six months," said Melamed.
He said LexMod's experience in terms of Amazon Products ads has been that CPC (Cost-Per-Click) on Amazon "is about 40% less than on other channels (namely Google Adwords)." With regard to the conversion rate, he also found it to be somewhat higher than any other channel. "We feel this is due to Amazon searchers being further into, and more serious about, the buying process," he said.
Product Ads have also shown to be effective compared to other comparison shopping engines and search engines. Andrew Davis of CPCStrategy.com said that its Q2 2012 Rankings found Amazon Product Ads was the number one Comparison Shopping Engine (CSE) for traffic volume, and in the top three in generating revenue. It's also in the top five overall best Comparison Shopping Engines.
Melamed uses both of Amazon's ad programs for LexMod. "We were very excited to be one of the first beta testers let into the Sponsored Products program," he said. "From the start of that program, we have been one of the most active participants and avid supporters."
Melamed said that while his sales results for the newer Sponsored Products program have been consistently strong since their beta days, the cost per click has gone up somewhat. "We started at a range of 1-3 cents and it is now about 25 cents." But, he said, "All in all, the program is still very reasonable. Especially considering the added benefits" (mentioned below).
The Amazon Sponsored Products program works in a similar way to Google Adwords, only all within the Amazon website. Sellers choose which products they want to advertise, assign keywords to those products, and enter a cost-per-click bid. "When an Amazon shopper searches for one of your keywords, your ad is eligible for display alongside the search results," according to Amazon's help text. Sellers pay a fee for the program only when an Amazon shopper clicks on their ad, at which point the shopper is taken to the detail page where their offer is listed.
Affect on Sales Rank, and Residual Income
"The advantage of advertising on Amazon (Sponsored Products) is that you don't just get sales, you also improve the sales ranking for your product," said Melamed, adding that "there's a lot of residual income that comes in after your product becomes a bestseller on Amazon."
He said that currently LexMod's Amazon ads amount to about three percent of his advertising budget. However, he said, "This is not due do to their low performance; rather the scope of this channel."
When to Use Sponsored Product Ads Vs. Product Ads
Melamed said that while he uses Amazon Product Ads for all his products, Sponsored Product Ads are generally reserved for popular items that happen to be underperforming.
"For example, if I start selling a very nice office chair, I know that people will be attracted to the price and style if given the chance," he said. The problem is, the market is very competitive, with almost 9000 items under the desk chair category. "Hardly anyone would ever see my new, fabulous chair. That was, until Sponsored Products."
Running this campaign on Amazon provides a double benefit for his products, he said. "For starters, the ad shows up on the bottom of the first page of search results. Right away, your product shares the spotlight with the most desired products in your category. Secondly, once your ranking goes up from this increased visibility, the engine starts fueling itself. As we've seen many times, a product that rises to the top 100 bestselling list is very unlikely to dip from it as long as you keep the campaign going."
While Google Adwords is great for interesting the average internet browser, the customer generally purchases once and moves on, he explained. "With Amazon you are building ranking, reviews, and drawing attention to your product for months to come."
Advice for the Newbie
What advice would Melamed give an online seller just starting out using Sponsored Product Ads?
"Keep a close eye on the costs vs. revenue generated," he cautions. "While there is residual income from promoting products, if it's not at least breaking even for you, then you should reconsider this advertising channel."
He said that Sponsored Products have recently made some improvements in the user interface that has helped. "Amazon now can generate a list of suggested keywords for you based on the items in your ad group. While I wouldn't put all my trust in an automated system to choose my keywords, it can be very helpful in coming up with pertinent keywords for your products."
Melamed said that while sellers may think it a pain to pay extra money on top of their standard seller commission fees, "the honest truth is that these ads pay (for) themselves. The CPC is generally small compared to the sales generated, not to mention the rank and long-term boost your products get for free."
Another important thing to remember: When you sell on Amazon (as opposed to your own website), you don't have to pay your regular advertising and credit card fees, he said. "So it may not be as costly as it sounds."
Amazon did not comment on when the program might be out of beta, saying, "we have a policy of not discussing details about our plans for the future."
Visit the Amazon Sponsored Products page for more information.
Julia also spoke to Mike Miller, Director of Organic Search & CSE Management at Build.com, who shared his experience using Amazon Product Ads. Check it out and leave a comment about both of these Amazon ad programs on the AuctionBytes Blog.