AI tools have reshaped how most things are done in the blink of an eye. We are seeing AI used in medical screenings, car purchases, internet searches, and, in our sector, Amazon advertising management. Overall, AI has been a huge benefit in terms of efficiency, analyzing mass amounts of data, and allowing us to take action and form objectives more nimbly. However, all this comes at a cost – the cost-per-click (CPC).
There are now hundreds of tools and add-ons available that can manage advertising cost-per-click and adjust it in real time to ensure that your ads get the best results. Sounds great, right? In theory. But what happens when bots compete? If Bidding Bot A increases bids to respond to market and competitive changes, then Bidding Bots B, C, D, etc., will all do the same, inflicting the resulting cost-per-click.
Most bidding automation tools started to roll out for Amazon management in 2022. We saw the mass adoption of these tools in 2023. As a result, costs per click on Amazon rose. It’s difficult to calculate an average CPC on Amazon:
- Amazon offers three different ad types, each with a different rate of adoption and ad inventory, ultimately skewing the average CPC.
- Amazon does not release the average CPCs on its site, and it has all the data. Any other ad agency or data site source is limited by what it can collect, which could miss major data segments or skew results if its data set is heavier in one product category than another.
Mind that the pandemic had a significant effect on data in 2020 and 2021. Initially, we saw a mass decrease in ad spending, which then surged in late 2020 and throughout 2021 as more consumers adopted online shopping and had the added benefit of stimulus checks in the US. Below are the averages we saw over the last six years. Note that this is across all campaign types and multiple product categories and is not representative of the whole Amazon advertising ecosystem.
| Year | Average CPC |
| 2019 | $0.86 |
| 2020 | $0.81 |
| 2021 | $1.01 |
| 2022 | $1.06 |
| 2023 | $1.04 |
| 2024 | $0.96 |
So what is an advertiser to do? If you don’t adapt and use some sort of AI automation, you’ll be left in the dust and lose revenue. If you do, you’ll face higher CPCs for the same return and then have to spend more to maintain it. Many business owners are feeling the strain across all advertising platforms. While there may not be much we can do to impact the game (the platforms control the board), we can control our strategy.
5 Ways to Be Proactive & Control Your Advertising Strategy on Amazon
1. Audit Your Listings’ Quality Scores
Amazon provides a Quality Score for each of your listings. This evaluates how your current listing information lines up with Amazon’s best practices and category benchmarks. The days of creating a product page and then leaving it as ‘good enough’ are long gone. To be competitive, brands need to always be optimizing and testing their listings and content on Amazon to maximize their conversion rates. The stronger your listing, the better your quality score, and then, in turn, the better your conversion rate.
2. Set Your CPC Limits
Business owners and brand managers need to know their costs. Knowing how much it costs to complete an order compared to the revenue that order brings in, allows advertisers to determine how much would be available to invest in advertising. Having this ratio at an item level helps to set expectations for returns on ads and draws a clear line on when ad efforts are simply too expensive.
For a simplified example, a product sells for $25 on Amazon. The seller uses Amazon FBA and knows their FBA fees per item are $9.00. The Seller fees and referral fees come out to $3.50, and then the product cost is $3.45. Before advertising, a seller has already invested $15.95 of their $25 selling point to be on Amazon. To advertise, the seller must determine what rate of return is needed to see the sales growth they want, but not lose money on every sale. This is why we recommend setting a cost-per-click limit for each keyword or ASIN target. This allows your ads to run up until that CPC limit is reached. Once reached, any additional budget added to increase the bid will result in a net loss on the sale.Â
3. Prioritize Your Ad Targets
In the past, the strategy with keyword targeting had been to test a wide range of targets, use long-tailed keywords, and cast a wide net to then be narrowed down. Now, with the growth of AI bidding, the opposite is the more prudent route. We select a specific keyword list, keeping it small and tight and then slowly expanding out from that list to maximize returns and minimize wasted spend. Prioritizing ad spending behind the keywords that have the largest impact on that product or brand helps to optimize your budget and spend it where it needs to be rather than continually casting a wider and wider net for more and more keywords that may be less specific.
4. Use Negatives
Negative keywords and ad targets have always been a critical component of a successful ad strategy, but now, with AI bidding tools, it’s even more vital. Keeping an up-to-date list of negatives allows you to avoid entering into a bidding war with a bot in the first place. This saves your budget, keeps your ad spend lean, and preserves your brand identity by refining where your ads appear.
5. Get Creative
Tailor your ad creatives, keyword lists, and product content to the specific shopper who is converting for you. Some brands on Amazon stumble by trying to appeal to too many groups or have their product so versatile that they lose their appeal to their customer base. Tailor your creatives to your search terms and ad keywords. The more shoppers can follow the journey of your product from their initial search to the ad click to the product page, and then finally to purchase, it makes for a stronger connection and increased ad conversions.
While AI bidding tools have revolutionized the advertising landscape by streamlining data analysis and campaign management, they also introduce a new challenge – increased cost-per-click driven by automated competition. To navigate this evolving environment, Amazon advertisers must adopt a proactive strategy by continually refining product listings to boost quality scores, setting defined CPC limits, and concentrating on high-impact keywords while leveraging negative targets to avoid unnecessary bidding wars.
Ultimately, success in this battle of the bots lies in harnessing the efficiency of AI while retaining a human-led strategic focus, ensuring that every advertising dollar is well spent in driving sales.
