Why Are PPC Costs So High Right Now and What Measures Can You Take To Prevent Amazon Advertising Expenses?

Just as any service in any marketplace, the average price of costs-per-click on Amazon is determined by supply and demand. This is no different than paying for coveted space in magazines, newspapers, television slots, billboards, blogs, and other media outlets. But what exactly is causing the sudden surge of PPC pricing and, as an Amazon seller, what efforts can you take the mitigate such costs?

If you are a seller on Amazon (or just a savvy customer), you probably have noticed an unsettling trend – many of the first-page positions on Amazon are filled with sponsored ads. Of course, if you are Amazon, this is great because it means more money is being spent on PPC which is a robust money-maker for the conglomerate.  

However, if you can’t afford the prices of clicks – even with the knowledge that it sometimes is your only measure to be discovered and to rank – your hands are pretty much tied. This is an especially hard blow with the expounding cost of shipping, storage, and Amazon fees.  

With a growing number of placements to utilize sponsored ads (including DSP), it’s become crucial to stay money-savvy when it comes to your PPC strategy. And while some things may be out of your direct control, there are ways to limit excessive advertising costs.  

The Burning Question: Why Has Amazon Sponsored Ads Become Expensive?

In recent months, PPC has increased (on average) to $1.20 per click. This is an uptick of 30% from $0.93 at the start of 2021 and up over 50%, year-over-year. Demand for advertising and coveted placements is rising faster than the ad availability on and off Amazon, thus driving up advertising prices. You can see this demand simply by looking through Amazon’s catalog with sponsored ads and videos inundating the landscape every which way you look.  

According to this article by Marketplace Pulse, the average cost-per-click (CPC) was $0.85 in 2020. It reached the lowest point of $0.70 in early May of 2020 when the COVID caused supply chain disruptions, making inventory availability impossible for many retailers and thus having no reason to run PPC. Rounding into Q1 of 2021, the average cost per click exceeded $0.90.  

The average ACoS for most retailers in 2020 hovered around 22%, rising to 25% in the first 2 quarters of 2021. The average advertising cost of sale (ACoS) was 22% in 2020. It has now risen upward of 30%. (These numbers do not take into consideration brand, new sellers).  

Furthermore, Amazon has turned most widgets on its website and app into paid-for advertising inventory. This is important to note because that has changed the landscape in which most of the ad spend on Amazon is for sponsored product results under SERPS. The result: CPC has risen as more brands are utilizing all types of advertising available to them, conclusively exhausting the pages of Amazon to what some deem look like a JC Penny coupon book.  

To make matters worse for SMBs, larger, bigger players have started taking over the ever-popular marketplace, bringing with them insatiable advertising spends. As a result, they can afford to compete for more ad space AND afford higher bids.  

Enter The Amazon Aggregator

But it’s not just large companies like Reebok, Kim Kardashian products, or Instapot that are taking over valuable advertising real-estate and inadvertently driving up CPC values – M&A companies and aggregators also have the power to do just this. According to Nozzle, “Sellers that choose to independently run their Amazon brands face massive competition from brands operating via Amazon Aggregators. These companies have huge funding which means they can scale more quickly due to increased investment in that brand.”

And a lot of that funding allows these acquisition firms to stream exorbitant amounts of money into Amazon advertising. This, in turn, not only increases these larger brands the likelihood of raking in more sales; it also increases public brand awareness as well as helping with organic ranking, perpetuates an even larger profit gap between SMBs and M&As.  

What Do the Increase of CPC Mean for Regular Amazon Sellers?

Funneling more money into PPC is probably not the answer. Here are just a few things you can institute that might temper your ad spend while still helping your brand succeed.  

Using omnichannel advertising and marketing funnels

Exploring and utilizing advertising strategies that go beyond Amazon’s platform is always in your best interest. Think of it this way: if you owned a brick-and-mortar store, would you only market to people in your direct vicinity or would you try to reach as many potential people as possible? PPC on Amazon only helps when potential buyers are already on the platform. But if you can create brand awareness through other means like social media, this will help diversify your portfolio and costs while reaching a wider audience.  

Don’t Set Yourself Up for Clicks That Won’t Convert

Don’t advertise on keywords that don’t directly represent your product. Sure, showing up on the top SERPS for popular keywords is great, but if a potential buyer clicks on your ad and it doesn’t convert to a sale because your product doesn’t fit the description of the keyword, it’s not jut a gamble – it’s money out of your pocket. Plus, it impedes your ranking.  

Use Amazon’s Bidding Strategies and Placements Correctly

Don’t take keyword bids at face value. Depending on the bidding strategies you employ at the campaign level, a $1 bid can turn into a $20 bid in real-time.

What does “Bids by Placement” refer to?

Bids by Placement is the ability to change your bids depending on where your ads are shown. So, this is a way for Amazon to say that if you like to bid more for certain placements, then they can show your ads in those placements. Moreover, it is through bids placement that you can win a bid when there’s competition. You’ll be competing for opportunities, and the higher you bid, the more likely you’ll be picked between top-of-search, mid-page, and product page.  

Why is this important?

Bids by Placement gives you a chance to:

• Increase Bids by Specified Amounts
• Change Default Bids Dramatically

What is Dynamic Bidding?

In comparison to Bids by Placement, wherein you focus on your competition, Dynamic Bidding puts emphasis on the likelihood of conversion based on buyer behavior. And understanding buying behavior is what decreases your PPC costs if you understand it well enough.

Here are the 3 Bidding Strategies

• Dynamic bids (down only): Amazon will lower bids in real-time if your ad may be less likely to convert to a sale.
• Dynamic bids (up and down): Amazon will raise bids by a maximum of 100% for Top of Search and 50% for other placements in real-time if the ad may be more likely to convert to a sale while lowering bids when the sponsored ads are less likely to convert.
• Fixed bids – Amazon will use the exact bid and won’t change bids based on the likelihood of a sale.

Try Placing Sponsored Ads on Products “Related To/Used In Conjunction With” Your Product

This may sound counterintuitive to the advice we just presented where we say make sure your sponsored ad fits the profile of the search request. However, a different tactic is to run ads on products that may be in your same category or field of interest as a supplemental or impulse purchase. Say you sell kids health supplements. There’s no reason you can’t try advertising your product under “back to school essentials” or “organic food for kids.” More than likely, a parent that is shopping for such products will be interested in “gummy vitamins” for their offspring.  

Focus More of Your Attention on Your Detail Page Than Anything Else

Keywords and sponsored ads are designed to get your product found. That’s it. That is their sole purpose. Once the customer has clicked on your sponsored ad, it is your responsibility to convert that click-through to a conversion. Expensive PPC is well worth your time so long as those clicks lead to sales. So, if you are barreling through your ad spend, that means there is something wrong with the keywords you are bidding on OR your actual listing. And more than likely, it’s your listing that is the issue.  

Instead of focusing your monetary means on PPC, maybe focus on some of that spending going toward better images, better sales content, or A+ material.  

Having Proper Quality Control in Place

Your product is only as good as your inspection process. If your implemented quality control is subpar, then the amount of subpar products that get through inspections are higher. This means more faulty products getting into your customers’ hands. Not only does this expose you to bad ratings and reviews as well as returns, but it also decreases your chance at return customers which deflates sales.  

And this puts you at risk of having your PPC be expensive. Why? Because when people click on your sponsored ad and see negative reviews and low sales, the likelihood of conversion is very low.  

Good inspections mean good products which mean good reviews which mean good results on PPC advertising, which is why so many Amazon Sellers trust in Movley to do ethical, thorough, and professional inspections with their quality control teams.