Amazon Advertising: Ad Types And How To Approach Your Strategy [2024]

A big thank you to Dave O’Brien for providing a ton of content for this article on Amazon advertising. Dave is a great friend of the Daasity team. If you’re looking for a true veteran to work with you on your eCommerce and Amazon strategy, look no further than Dave and his agency, OTS Group Inc.

Let’s get right into it: strong ad performance is the only way to grow your brand on Amazon.

You will not only bring in revenue from the ads themselves, but you will help your advertised products organically rank higher. Products with the best sales numbers, the highest conversion rates, the most reviews, and the highest ratings are the ones you’ll see at the top of Amazon’s Search Engine Results Pages (SERPs).

In short, suitable Amazon ads pay dividends.

However, there is fierce and savvy competition on Amazon: you can only guess your way to growth if you post a few Amazon ads and bring renown to your brand. Unfortunately, you’ll have much less money than you started with and need more understanding of where you could have done better.

This guide will explain the types of ads, Amazon seller tools and how to use them, give you tips for a successful Amazon advertising strategy, and help you grow on the world’s largest marketplace.

Amazon ad types: what they are, where they appear, and how to use each

As of 2022, Amazon has three ad categories:

• Sponsored Products
• Sponsored Brands
• Sponsored Display

There are four places you can expect to see them:

1. Amazon’s Home Page: All three ad types can appear in designated blocks on Amazon’s HP, which is personalized for each user. For this article, I used pre-workout as a product example, clicked on Redcon1’s pre-workout supplement, and encountered ads from Redcon1 both on-site and off-site (see #4 below):

2. Amazon’s SERPs: All three ad types appear throughout a search page, surrounding and among organic (i.e., non-paid) results.
3. Amazon’s PDPs (Product Display Pages): All three ad types appear in designated places on PDPs, and they can be ads from the same brand or competitor.
4. Externally (i.e., on sites other than Amazon): Sponsored Display ads appear on other websites in designated ad slots—these often appear on news sites or Amazon-owned/affiliated sites. Here’s an example of an external ad found on IMDB, which Amazon owns, again showing a pre-workout ad from Redcon1:

Now, let’s examine and analyze each of the ad types:

Sponsored Products

Sponsored Products are individual items that brands can pay to promote. Brands often use Sponsored Products to acquire new customers, drive sales, and improve their Amazon SEO.

Below is an example of a typical Sponsored Products ad and what goes into it:

The highest volume of Sponsored Products can be found on SERPs, which appear at the top and bottom of the page and are interspersed among the organic results.

In recent months, Amazon has substantially increased the real estate to Sponsored Products, particularly for the most competitive keywords.

Sponsored Products on Amazon SERPs

At the top of many Amazon SERPs, there is a Sponsored Display ad (which I’ll cover in the next section), but below that, the Sponsored Products begin:

As you scroll, a carousel for more Sponsored Products is categorized as “HIGHLY RATED.” Below are more organic results:

What follows are more layers of organic results and full-row Sponsored Products offerings. Eventually, the search page ends, and you’ll encounter another carousel of Sponsored product ads that are “Recommended based on your browsing history:”

Sponsored Products on Amazon PDPs

Carousels of Sponsored Products frequently appear on PDPs. In this case, I clicked on one of Redcon1’s pre-workout supplements from an organic listing and scrolled down the page.

The first carousel to appear included competitors’ pre-workout supplements:

Near the very bottom of the page, Redcon1 had its carousel:

How to use Sponsored Products + find keywords

Sponsored Products are fundamental to building and maintaining your brand recognition and presence on Amazon, but a well-considered keyword strategy is also essential to the ads.

You must do serious research on your product and product category to find relevant, specific, and high-intent keywords. To facilitate this process, I highly recommend AI platforms such as Sellozo and Heilium10 for keyword research and budget optimization (more on these tools later in the article).

If you start bidding on high-level and general keywords related to your product category or niche, especially if you’re not a large brand, you’ll blow through your marketing budget.

For example, one of the brands I work with sells pet grooming products. While I started by bidding on some general keywords like “dog brush” using Heilium10 and Sellozo, I found the keyword “slicker brush.” I included variations of that (e.g., “slicker brushes,” “slicker brush for dogs,” etc.), which were more successful.

• It’s also necessary to include negative keywords in your campaigns to avoid running up your ad budget on tangential terms and optimize for more successful terms.

Regarding cost, know that Sponsored Products’ CPCs increase with higher Amazon SERP positions. If you want to appear at the top of the SERP for specific keywords, you can expect to pay significantly more per click. However, retaining your customers for years and counting on significant lifetime valueis worth it. Some of the most competitive keywords can cost over $100 per click.

Picking the right products to advertise as Sponsored Products

One of the biggest things you can improve in your advertising strategy is picking the right products.

I recommend you pick your top 1-2 products and focus your Sponsored Products’ CPC dollars on them. Your products have the highest reviews, ratings, conversion rates, and FBA Prime inventory.

You only want to make ads for products with a low conversion rate if you’re trying to launch a product. The most successful brands on Amazon are not trying to sell through their entire catalogs via Sponsored Products. They optimize their ads around their hero product(s) and drive enormous volume: that’s how they hit their numbers.

Sponsored Brands

Sponsored Brands ads allow brands to promote themselves, and you can think of them as the billboards of Amazon ads.

Using Sponsored Brands ads, competitors cannot attack ads on each other: one brand cannot assume the identity of another brand or otherwise bid on another brand’s behalf.

There are three categories of Sponsored Brands ads:

Here’s a breakdown of the first type (product collection) as an example:

Sponsored Brand ads on Amazon SERPs

Now, let’s look at how these appear within Amazon. Using the example search from above for “pre-workout,” Optimum Nutrition appears in a Sponsored Brands ad at the top of the page:

A few rows down on this SERP is a separate section for another type of Sponsored Brands ad: a video ad (bracketed in red). In this case, Redcon1’s video ad about their pre-workout is featured:

At the bottom of the SERP, after more rows of Sponsored Products and organic results, there is a block called “BRANDS RELATED TO YOUR SEARCH.” In the block, three supplement brands are shown, including Optimum Nutrition for a second time (this is the other kind of Sponsored Brands ad, store spotlight):

Using Sponsored Brands ads

Sponsored brand ads work best when you already have a presence on Amazon. When you’re established, customers will use Amazon as a search engine to find your latest products and otherwise explore your catalog.

Therefore, if you’re starting out on Amazon, you’ll want more of your advertising budget dedicated to Sponsored Product ads. As you grow, you can dedicate a more significant percentage of your budget to Sponsored brand ads and start bidding on competitors’ branded keywords to drive up their CPCs (after all, they will likely do the same to you).

Sponsored Display Ads

Sponsored Display ads are a relatively new ad category introduced at the end of 2021. They are Amazon’s retargeting ads and can appear on Amazon and other sites (often, Amazon-owned sites).

Unlike with Sponsored Products and brand ads, you can’t bid on specific keywords for Sponsored Display Ads. Instead, you bid on placement opportunities based on CPM and PPC.

While you build the creative, Amazon will handle the placement of the ads. Their appearance can vary depending on where they pop up, but they generally include the following:

Sponsored Display Ads on Amazon SERPs

Interestingly, there was no left-side Sponsored Display ad on my “pre-workout” search (even after reloading the page and trying an incognito window), so I searched for a different keyword: “cold brew.”

In this case, I was shown a Sponsored Display ad related to fitness, which makes sense from a retargeting standpoint given my recent browsing for supplements for this article:

Sponsored Display Ads on PDPs

Sponsored Display Ads may also appear on Amazon PDPs. Here is an example of Optimum Nutrition’s popular Gold Standard Whey Protein PDPs:

On this PDP, one of Optimum Nutrition’s competitors, Naked Nutrition, has two Sponsored Display slots, each featuring a different product.

They will do so if Amazon gains extra ad revenue and increases brand competition. So, from their perspective, the more ad slots they can fit on a PDP, the better. This is why you must ensure you’ve optimized your Amazon PDPs (but that’s another article for another time).

Sponsored Display ads off Amazon

Some off-platform Sponsored Display ads will appear in the same format as they do on Amazon. Take, for instance, this ad featuring Naked Nutrition that I encountered on Goodreads:

I’d also like to highlight sponsored display ads frequently appearing on Twitch’s streaming platform. Given the massive volume of Twitch users (at least 140m active monthly users in 2022), Amazon has heavily leveraged Twitch for ads.

Sponsored Display ads on Twitch may look like the previous examples or be squeezed into different parts of the site. For instance, Acer has the following ad on Twitch’s homepage:

Using Sponsored Display ads

Here are a couple of primary use cases for Sponsored Display ads.

1. Paid Cross-Sells

When they appear on Amazon, Sponsored Display ads allow you to cross-sell your product(s) on your PDPs and your competitors’ PDPs.

Amazon automatically creates cross-sells and bundles based on customers’ buying behavior and product performance (in the PDP section entitled “Frequently bought together”). Still, you don’t have any control over this.

By bidding on keywords and products (which you do using ASINs), you can have more power over where your product(s) pop up.

• If you bid on your ASINs, you can get cross-sells to appear on your PDPs
• If you bid on competitors’ ASINs, you can conquer your competition and appear right below the Buy Box and “About this item” section at the top of a PDP. (In the Optimum Nutrition example, two of Naked Nutrition’s products are shown at the top of the protein powder PDP. Naked Nutrition’s product under the buy box is a direct product competitor, but its product under the “About this item” section is a competitive cross-sell.)

2. New Product Introductions (NPIs)

A great use case for these Sponsored Display ads is for NPIs (New Product Introductions). Since you target ASINs or product categories, they’re a great way to promote your new products.

A word of warning on Sponsored Display ads’ cost

Be careful of ad spending and AVg CPC for your sponsored displays. The ad spend can be greater than the conversion, depending on your target products. Make sure you watch your max CPC.

A quick note on Amazon Ad variation

Amazon is constantly A/B testing where to put ads and how many ads it can show visitors without disrupting the shopping experience. It doesn’t want to overstuff its platforms with ads, but it wants to find the too-many-ads line and go right up to it.

As a result, you need to be aware of changes that Amazon is implementing that may affect your advertising performance. In general, you can expect that Amazon will make some small changes to ads every quarter and more significant changes yearly.

How to measure your advertising success

On Amazon, TACoS should be your north star metric pronounced like food.

TACoS stands for total ad cost of sale, and it measures how your ad spend impacts your total revenue, not only the revenue attributed to ad spend—this would be ACoS (ad cost of sale), which is the inverse of ROAS.

I recommend TACoS for Amazon because it also includes your organic sales performance. Since successful advertising helps organic ranking on Amazon, it’s essential to factor everything in to indicate your overall performance.

To calculate your TACoS, divide your total ad spend by your total revenue and multiply the result by 100:

My best advice for your Amazon advertising strategy

First and foremost, be willing to invest to learn, get the data you need, and use the tool(s) that will help

At this stage of Amazon’s maturity and saturation as a marketplace, you must be ready to make a fairly substantial monthly investment in learning, testing, gathering data, and seeing how your brand performs against competitors.

I recommend spending $5,000 to $15,000 monthly as you begin testing ads.

• This should factor in at least one tool to help you optimize your ads (see next section).
• From an on-platform spending standpoint, this budget will allow you to start carving out your place in your vertical(s) and figure out where you stand.
• If you’re new to Amazon, especially trying to save money, stick with bidding on your branded terms to target people already searching for your product. If you start searching for competitive keywords, you’ll find that you can spend a lot of money quickly.

However, as a caveat to that third point, if you don’t have an established brand on an eCommerce platform (e.g., your Shopify or Magento store), don’t assume that you’ll be able to sell on Amazon unless you’re the only person making a particular type of product.

You’ll be competing against the largest brands in the world, and without an established brand presence, you will not win when going after competitive keywords. If you sell coffee, you will compete against multi-billion dollar brands like Starbucks, Dunkin’, and Lavazza.

Given that those brands have nearly unlimited budgets (or what may seem unlimited in comparison to a smaller eComm brand), you want to avoid trying to outbid them.

The first step toward selling on Amazon for many brands is growing your brand off Amazon.

Rely on AI-powered Amazon advertising assistant tools

A part of your budget must include the use of an Amazon tool. Tools like Heilium10 and Sellozo will find the best keywords to bid on for your products and automatically optimize your spending day and night.

All of your serious competition on Amazon is using these.

Without them, you’ll spend many hours every week trying to find your best opportunities and work on your ad spend, which is time that can be leveraged elsewhere in your marketing and advertising—for example, working on your ad copy and creatives.

And, even if you spend those hours a week looking for opportunities, you will need more time to sift through as much data, find the opportunities, and make the changes that the tools will.

They’ll be your new favorite work assistants–who work 24 hours daily.

Saturate for success: use every ad type

A part of your journey of advertising on Amazon will be figuring out the balance of ad types that work best for your brand. As with most things, this will vary for every brand, but you should invest in all three ad types.

Ideally, you can successfully saturate a particular Amazon SERP, which means ads of all types show up, building associations between your brand and the specific keyword.

Build and use LPs for your most important keywords

Within Amazon, you can build your microsite and LPs, which you can use to route people from your ads.

Getting your in-Amazon site optimized and how to go about it is a separate discussion, but I want to call attention to LPs because they will increase your conversion rate from Amazon ads.

I recommend building LPs based on the main assets that you show in your Sponsored brand ads. Some brands will have a beautiful product image in their Sponsored Brand ads. Still, the image will lead to their microsite home page, which needs to be revised and deviates potential customers from their research and buying experience.

If someone has clicked on an asset, they are likely interested in the product they see.

Caraway does a great job of this in their Sponsored Brands ads. When you click on the main asset shown in their ad, it brings you to an LP about that product (their Fry Pan), filled with other images and information about it. The following two images are the flow from ad to LP:

Investing the extra resources and effort to create experiences around each ad will significantly benefit the short and long run. It will increase conversion rates and sales, increase organic rankings, and create an Amazonian virtuous cycle.

Be thoughtful about video production.

As with the well-considered ads-to-LPs strategy, I recommend thinking about video ads (if you choose to make them) and how to make them as targeted as possible.

If your video ads match particular keywords as much as possible, they will catch potential customers’ eyes and prompt them to watch your ad.

For example, I searched Amazon for “Japanese bonsai spruce tree kit,” a specific query for which only someone with an exact product in mind would search. But a product video that came close to my search did come up:

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If I were in the market for this type of kit, I would likely click on this ad. This brand did a great job targeting keywords and phrases relevant to its product offering.

The end and the beginning

I hope you found this article informative and helpful, whether you’re just starting with Amazon advertising or already building your brand.

Good luck!