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amazon advertising profitability on vendor

Understand advertising profitability on Amazon

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Do you know your advertising profitability on Amazon Vendor?

In our previous article in the Amazon Vendor series, we discussed the key areas you need to account for when measuring profitability.  One area that can make a huge difference to your profitability is the performance of your advertising within Amazon.  Paying attention to every aspect of spending can make a huge difference to your overall cost savings.

advertising profitability on Amazon Vendor calculation

It is estimated that there are over 400 million unique items on Amazon, so you need to take care of a number of factors to ensure that your listings are as high as possible in the rankings, and in the search results. So effective advertising within the Amazon ecosystem is a critical part in ensuring your products are shown when potential customers are looking for them.

Amazon provides a comprehensive advertising dashboard to help you define and monitor your advertising. Although you can review advertising performance within the Amazon advertising dashboard, this is per marketplace.

Further, it’s not currently possible to blend this advertising data with Amazon retail sales data, meaning important metrics such as TACOS (Total Advertising Cost of Sale), and the percentage of sales driven by advertising compared to organic, require manual data extract (CSV’s and spreadsheets, anyone?) or a 3rd party software tool connected to Amazon.

There are software products available which can summarise advertising spend and some sales data, but you’re locked into the metrics they offer, and you don’t have the flexibility to slice and dice the data, or blend with your own data, that you might wish for.

Amazon Ads API connector Pipes

That’s where Data Virtuality Pipes comes in! We handle all the complexity of extracting the important sales and advertising data from your Vendor accounts, at any frequency you wish, for you to manipulate and analyse.

Read on to learn more about the possibilities of a more flexible approach to accessing your Amazon Vendor data.

Amazon Advertising for Vendors

Before we go into further detail, it’s worth reminding ourselves of the advertising options available within Amazon Vendor. Here’s a brief overview of the campaign types available to you as a Vendor, the building blocks of your advertising on Amazon.

Amazon Sponsored Products (SP)

The most common and basic options available, and are displayed in Amazon’s main product search results. SP campaigns can be automatic or manual – for automatic, Amazon does the heavy lifting, deciding on most aspects of the bidding process and determining the most suitable keywords. Manual campaigns allow much greater control over the selection of keywords, bids and placements. However, more research is needed.

Amazon Sponsored Brands (SB)

More creative options are permitted with this method of advertising, with options including product video placements and banners. Customers can be directed to product pages, dedicated Amazon landing pages, or your Amazon store. Brand campaigns are great for awareness, and can really help you stand out from the crowd.

Amazon Sponsored Display (SD)

Sponsored Display opens up further targeting options, to reach your potential customers in different ways. Amazon offers views-based targeting, product-based targeting, and interest-based targeting.

Views-based targeting allows you to re-engage potential customers with retargeting and remarketing. You can even focus on buyers with high-purchasing intent who may have shown interest in your products, or indeed those of a competitor.

Interest-based targeting – a great option if your goal is to improve brand recognition, with Amazon presenting your advert to potential customers looking for similar products or products within a specific category.

Product-based targeting allows you to promote awareness among buyers who may have shown an interest in purchasing similar or complementary products to your products.

Amazon Demand-Side Platform (DSP)

Amazon DSP is a demand-side platform that allows you to programmatically buy advertising to reach new and existing audiences on and off Amazon.  Whereas the Sponsored advertising on Amazon is cost per click (CPC), DSP pricing varies by format and placement.

Data, data and more data!

Multiple reports are available within the Vendor advertising dashboard, covering many useful metrics. Various reports are available for Sponsored Product, Brand and Display. For brands with enough sales history, Amazon also provides Brand Metrics, a tool that quantifies opportunities for your brand at each stage of the customer journey on Amazon.

As an example, you’ll be able to access keyword data, to determine the most effective search terms used by potential customers, and how much it costs to compete for prominent placements for each search term. Other metrics include impressions, clicks and orders per search term or keyword, giving insight into click-through rates and conversion rates, critically important metrics for advertisers to pay attention to.

With careful analysis of the reports, you’ll be able to spot important trends and know where to make adjustments to improve performance.

Unfortunately, these reports are only available per marketplace, and each type of advertising has its own separate reports available for download as CSV or spreadsheet. Without a 3rd party solution, there’s a great deal of “stitching” together to be done, to allow real insights into the data.

Once you have the data consolidated in one place, that’s where real value can be exploited. Comparing performance across SKUs and marketplaces becomes possible. Tracking year-on-year and month-on-month performance of any metric allows you to determine if you need to make adjustments to budget, keywords and bidding strategy to respond to competitive threats.

Data Retention

One key aspect Amazon vendors face is accessing historical data. Amazon’s “look back” period for advertising data is just 60 days for most reports. Useful, but nowhere near enough for real insight into ongoing performance, and tracking important metrics and trends.

It is possible to schedule reports to run daily, weekly or monthly, to save important data, but you would then need to download them (per marketplace!), and of course, consolidate them.

amazon advertising profitability data retention

A solution that extracts data directly from Amazon, and allows you to keep it safely in one place, without worrying about missing data, or downloading files, becomes critical. That’s where Pipes comes in, allowing you to pull advertising, sales and operational data from Amazon, and place it in a database of your choice, ready to make available to your team for further analysis. Further value can come from blending this data with other sources within your organisation, which cannot be stored in Amazon, allowing a much richer picture to be presented, comparing your Amazon channel to other routes to market you may have.

Amazon Advertising Profitability

Looking at advertising costs in isolation won’t provide you with a true picture of your advertising performance, or indeed what impact advertising spend has on the profitability of your vendor relationship with Amazon.

As we discussed in our previous article in this series, there are many aspects to take into account when looking at profitability, but the first step is to gather all the relevant data in one place. Only then can you get a clear picture of costs and income, the relative performance of advertising, how many sales are driven by advertising compared to organic customer orders, where customers find your products without clicking on an advert.

There are solutions available to summarise sales and advertising data, but you’re then locked into the analysis model imposed by the software, with little scope to ask more difficult or unique questions of the data or slice the data in different ways to spot important patterns.

Having the ability to bring all Amazon data into one place, and prepare more bespoke reports and analyses, is critical for larger Amazon Vendors, and helps them stay one step ahead of their competitors!

About Boomd

A full-service Amazon agency, with a team of Amazon Vendor and Seller experts, helping brands, manufacturers and distributors sell profitably on all Amazon marketplaces worldwide.  Boomd can support you with all aspects of Amazon Vendor, Amazon Seller and Advertising on Amazon, and pays particular attention to helping you sell profitably.

Title: Amazon Vendor profitability
Series: Amazon Vendor
Author: Nick Turner, Co-Founder, Boomd Amazon Agency
Date: January 2023

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