Recently a number of our customers have been asking about the Amazon ‘Sponsored Products’ ad program and how it differs from their Product Ads, if at all. Do both aim to put your products in the spotlight?

Two Different Initiatives

Firstly, to clear up the confusion, they are in fact two entirely different initiatives—Amazon Product Ads are designed to allow sellers to advertise their products on Amazon but drive customers to their own websites to complete the transaction (sales are handled by the individual sellers on their own web stores which has nothing to do with Amazon), however the newly launched Amazon ‘Sponsored Products’ ad program allows Amazon merchants to promote the products they sell on Amazon with keyword targeted ads, paying only when the ad is clicked.

This is similar, in part, to Google Adwords—you choose which products you want to advertise, assign keywords to them and enter your cost-per-click bid. If a shopper searches Amazon using one of your keywords, then your product ad becomes eligible for display within the search results, and you only pay a fee if the shopper clicks on your ad.

In principle, ‘Sponsored Products’ seems like a dream—after all, who doesn’t want to appear higher in search results for their products, but in reality, it’s a case of trying it and seeing if it works. As the program is open to all merchants who are eligible for the Buy Box, there will be strong competition for certain products and keywords, which will drive the cost-per-click bids up and up. A recent article by Ecommercebytes on the subject highlighted some great advice from a seller who is already trying it—Moshe Melamed of LexMod.com advises new users to, “Keep a close eye on the costs vs. revenue generated”. If your profit margins are very slim on the particular advertised products then such close scrutiny is all the more important, however, if you are selling high margin stock, then such additional small costs for click-throughs might not be an issue.

The Amazon Search Engine

I have alluded before to the fact that Amazon is like a big search engine for ‘products to buy’—since its catalogue of inventory is so huge, allowing customers to search and find the products they want becomes ever more important. For sellers, the analogy still holds true—with so much competiton to land first place on search results (the Buy Box) or high up on in them (More Buying Options) they now have the additional option of paying to rank higher in customers’ searches.

As with Google AdWords the costs can mount and be a big waste of time and money if you don’t know what you’re doing. You could decide to use the Amazon Sponsored Product Ads to increase your ranking for a particular product, moving it in front of more and more buyers which will continue to help its ranking, but you need to consider the costs of doing that and consider your profits at all time.

Not a Magic Bullet

Amazon Sponsored Products isn’t a magic bullet to increase your sales, just as Google AdWords isn’t the one thing you can use to drive traffic to your site. Used correctly though and in conjunction with other activities that you NEED to engage in (like optimising products’ search visibility, price optimisation and customer service) it offers the possibility of higher sales. Only you know will know if it’s the right strategy for your business, but trying and testing is definitely a viable option within your overall selling and pricing strategy.

In fact, there will be many savy sellers who combine and test Sponsored Products alongside their pricing strategies to increase their sales and margins. As with all tools—for success, they require skill and forethought to truly get the best from them.