If you sell on Amazon, you have figured out that advertising is a necessity to drive sales. But how does Amazon Advertising actually work, and how is it different than other platforms such as Google or Meta?
At its core, advertising on Amazon is designed to do one thing, and that is to put your products in front of shoppers who are looking to buy.
Why Amazon Advertising Is Different
Amazon Advertising is an intent-based platform, meaning that shoppers type into the search bar what they are looking for.
The main difference between Amazon Ads and Meta Ads is the intent behind the audience you show the ads to. On Meta, you are targeting audiences of shoppers based on their likes, dislikes, what they normally interact with, purchase, etc., and by doing so, you are building demand for your product. Roughly 50% of that audience comes to Amazon now to try to fulfill their demand by searching for your product onsite, resulting in a much higher conversion rate, depending on whether you have a website or not. Google and Amazon operate similarly, but Google is used far more often than Amazon for research purposes.
This is why Amazon Ads tend to have higher conversion rates than the other platforms, because the shopper is already in buying mode.
How Amazon Advertising Works Behind the Scenes
In order to truly understand how Amazon Advertising works, you need to realize that the platform is auction-based. Amazon ads run on a cost per click (CPC) model. You only pay when someone clicks your ad. That means that you set a bid on keywords or targets that you want your products to show on, but so does your competition.
Amazon Targeting Options
You can target shoppers in two main ways:
- Keywords targeting – bidding on search terms that consumers type in the search bar
- Product targeting – bidding on placement on specific ASINs or categories
While your bid is very important in winning the placement for your ad, Amazon considers several factors when determining which ad to show: your bid, your relevance (keyword match, listing quality), and your historical performance (click-through rate, conversion rate, inventory levels, etc.). This means that while it is an auction-based platform, the highest bidder doesn’t always win. Products that have strong listing quality, conversion rates, etc., can often outperform competitors with higher bids.
The Biggest Misconception About Amazon Ads
One of the biggest misconceptions I hear from people who sell on Amazon is that ads alone can drive profitable sales and growth, and that they can fix a bad product or listing, and the truth is that they can’t. Paid Amazon Ads amplify what’s already there. If your images and PDPs are weak, your price is too high, or your reviews are poor, ads will just help accelerate wasted spend because your product doesn’t convert at a high enough rate. Instead, you need to think about it like ads get the click, your listing gets the sale.
Advertising and the Amazon Flywheel Effect
For me, the most important key to success in selling on Amazon is understanding the Flywheel Effect and how advertising plays its part in the Flywheel Effect.
When ads are running correctly, they help start the Amazon Flywheel Effect. Ads start by driving people to your listing, your listing quality helps convert or close the sales, sales improve organic ranking, a high product ranking helps drive more organic sales, which helps reduce ad dependency, and in the end, lowering your ad costs helps improve profitability.
This is why many, if not almost all, of the top sellers continue spending on Amazon Advertising even after they have a high ranking organically. It not only helps drive sales, but it also helps protect their position and scale growth.
Does Amazon Advertising Even Work?
So, does Amazon Advertising even work? Yes, but only when it’s managed properly and understood that it is not the one size fits all fix for slow sales or low profitability on the platform.
Amazon Advertising isn’t just about turning ads on and spending some money. It is about choosing the right keywords and placements, controlling bids and budgets based on your goals as a business, optimizing listings, and continually monitoring and optimizing your ads based on what the competition is doing. When you get everything working together correctly, Amazon Ads becomes less of an expense and more of a way to fuel growth.
