How Amazon PPC works, in plain English

Amazon PPC is explained badly almost everywhere, usually by people who already understand it. This is the version we give clients who have never run a campaign.

What Amazon PPC actually is

PPC stands for pay per click. You tell Amazon which search terms you want your product to appear for and how much you will pay when somebody clicks. You pay for the click — not for being shown, and not for the sale.

That last point is the whole game. You pay for every click regardless of whether it leads to a purchase. If a hundred people click and two buy, you paid for a hundred clicks and earned two sales. Whether that is good or catastrophic depends entirely on your margin, which is why advertising decisions are really margin decisions.

How the auction decides what you pay

When a shopper searches, Amazon runs an instant auction among advertisers targeting that term. Two things are worth understanding.

You do not pay your bid. You pay roughly what is needed to beat the next advertiser. Bid $2.00 where the next-highest is $1.20 and you pay around $1.21. Bidding higher than necessary mostly buys position, not cost.

Relevance affects your cost. Amazon favours listings likely to convert, because it earns on sales, not clicks. A well-optimised listing wins placements more cheaply than a poor one bidding the same. Listing quality and advertising cost are not separate problems — a bad listing makes every click more expensive.

The three campaign types

Sponsored Products

Individual products in search results and on product pages. Where everyone starts, where most accounts should keep most of their budget, and where most of the opportunity sits. If you run only one campaign type, run this one.

Sponsored Brands

The banner at the top of search with your logo and several products. Requires Brand Registry. Good for brand defence and driving shoppers to a storefront, but it is a visibility play, and judging it on ACoS alone usually leads to switching it off prematurely.

Sponsored Display

Retargeting, on and off Amazon. Useful for genuine repeat purchase or long consideration cycles. Most sellers should ignore it until Sponsored Products works properly.

Setting up your first campaign

Before anything else: do not advertise a listing that is not ready. Advertising amplifies whatever your listing already does. If it converts badly, you will pay to find that out at scale. Fix images, title and bullets first.

1. Work out your breakeven ACoS. Not optional and not a guess. You cannot set a sensible bid without it, and it is the step beginners skip.
2. Start with an automatic campaign. Amazon chooses the terms from its own reading of your listing. The purpose is not profit — it is discovering which terms real shoppers use. Treat the first weeks as paid research.
3. Set a daily budget you are comfortable losing. $10–$20 a day is plenty. Budget does not need to be large to produce useful data.
4. Set bids slightly below Amazon’s suggestion. The suggested bid is generally on the high side; starting 10–20% under gives room to learn.
5. Then wait. Two weeks minimum, without touching anything. Genuinely the hardest step. Changing bids daily means you never accumulate enough data at any one bid to learn from it.

What to do in the first month

After two to three weeks, open the search term report. It shows the phrases shoppers actually typed, as opposed to what you targeted, and it is the most valuable report in the account.

Sort terms into three piles:

• Converting. Move into a manual campaign on exact match where you control the bid. This is harvesting, and it is the core loop of Amazon PPC.
• Spending with no conversions. Add as negative keywords — but only once a term has had a fair test. A term with four clicks has told you nothing.
• Too early to say. Leave alone. Most terms land here at first, and acting on them is how beginners destroy campaigns that were about to work.

That judgement — whether a term has had a fair test yet — is exactly what our keyword decision tool answers, because getting it wrong in either direction is expensive.

Then repeat. Automatic campaigns discover terms, manual campaigns exploit the good ones, negatives stop you paying for the bad ones. That loop, run patiently, is most of what Amazon PPC management consists of. Everything else is refinement.