What Is PPC on Amazon and How Does It Work?

Amazon PPC (Pay-Per-Click) is Amazon’s advertising system, and it works exactly like it sounds: you only pay when a shopper clicks on your ad.

Think of it as renting a premium, eye-level shelf in the world’s biggest online store. Instead of waiting for customers to find your product on their own, you’re placing it directly in their path, right when they’re searching for it.

What Is Amazon PPC and Why Is It a Must for Sellers?

If you’re new to selling on Amazon, trying to rank your product organically can feel like an incredibly slow and frustrating process. You might have a great product, but it’s stuck on page 10 of the search results where, let’s be honest, no one ever looks.

This is the problem Amazon PPC solves. It gives you a way to get instant visibility and jump straight to the top of page one.

The whole system is an auction. Sellers place bids on keywords they want their ads to appear for. When a shopper’s search matches one of your keywords, your ad enters a real-time auction against other sellers. The winner’s ad gets displayed in a prime spot, like the top of the search results or on a competitor’s product page.

Let’s quickly break down how the PPC process works.

How the Amazon PPC Process Works

Amazon ads work on a simple flow: your product first gets impressions when shown to shoppers, then clicks if the ad looks appealing. A strong listing leads to add to cart, and finally a purchase. The more this cycle completes, the better your ads perform and the lower your costs become over time. Here are the details of how it goes,

1. You Bid: This is the maximum amount you’re willing to pay for a single click on your ad (e.g., “vitamin c serum”).
   

   

2. Amazon Bid Auction: A customer searches product with keyword “vitamin c serum” and Amazon instantly compares your bid and your product’s relevance against other advertisers and assigns a bid you will pay when your ad is clicked. See the bid auction process below.
   

   

3. Your Ad Is Shown (Impression): If you win the auction, your ad appears in the search results. This is called an impression.
   

   

4. Shopper Clicks: The customer sees your ad and clicks it. You are now charged $2.01 for that click.
5. Shopper Buys (or Doesn’t): The customer lands on your product page and decides whether to make a purchase.

Why Do Sellers Rely on Amazon PPC So Much?

Sellers use PPC for a few critical reasons that go beyond just making a few extra sales.

• Launch New Products: When you have zero sales history or reviews, PPC is the fastest way to get your first customers. It kickstarts the sales flywheel.
• Drive Immediate Sales: Organic ranking is a long game that can take months. A well-structured PPC campaign can start generating traffic and sales within hours. This is a big part of learning how to improve Amazon sales effectively.
• Gather Customer Data: Your PPC reports show you the exact search terms shoppers use to find and buy your product. This is pure gold for optimizing your listing and marketing strategy.
• Defend Your Brand: Competitors will bid on your brand name to steal your customers. Running “defensive” campaigns on your own branded keywords protects your turf.

PPC advertising isn’t just an Amazon-specific trick; it’s a fundamental part of modern digital marketing. For those looking to scale operations, understanding the benefits of outsourced ecommerce success can be a game-changer, letting you focus on your brand while experts handle the complex logistics.

Key Amazon PPC Terms You Must Know

Before you spend a single dollar on Amazon ads, you need to speak the language of your advertising dashboard. These metrics are your report card. They tell you exactly what’s working, what’s a waste of money, and how shoppers are responding to your ads.

These acronyms can feel intimidating, but they are simple once you understand what they measure.

• Click-Through Rate (CTR): This shows how effective your ad is at getting a click. It’s the percentage of people who clicked your ad after seeing it. A low CTR is a huge red flag that your main image, title, or price isn’t compelling enough.

CTR = (Clicks ÷ Impressions) x 100

• Conversion Rate (CVR): The percentage of clicks that turn into a sale. A high CVR means your product page is doing its job. According to a recent Amazon advertising stats report, the average Amazon PPC conversion rate is around 10-12%, which is much higher than other e-commerce platforms.

  CVR = (Total ÷ Total Clicks) x 100

• Advertising Cost of Sale (ACoS): This is the most talked-about metric in Amazon PPC. ACoS shows your ad spend as a percentage of the revenue those ads generated. A lower ACoS is almost always better.

ACoS = (Total Ad Spend ÷ Total Ad Sales) x 100

• Total Advertising Cost of Sale (TACoS): This metric gives you a bigger picture. It measures your ad spend against your total sales (both organic and ad-generated). It helps you see if your ad spend is helping your overall sales grow.
• Return on Ad Spend (ROAS): This is the flip side of ACoS. It shows you how many dollars in sales you get for every dollar you put into ads. A higher ROAS is what you’re aiming for.

ROAS = Total Ad Sales ÷ Total Ad Spend

Let’s make that real. If you spend $20 on ads and that generates $100 in ad sales, your ACoS is 20% and your ROAS is 5. That means you made $5 for every $1 you spent. Not bad.

Getting a handle on these terms is your first step. They are the foundation for making smart, data-driven decisions, like choosing the right keywords to target. If you’re starting from scratch, our guide on keyword research for Amazon will help you lay a strong foundation.

The 3 Main Amazon Ad Types

Amazon gives you a few different ways to get your products in front of shoppers. Picking the right one depends on your goal. Are you trying to get a quick sale, build brand awareness, or remind a shopper about an item they viewed?

Each ad type has a specific job. Let’s walk through the three main options.

1. Sponsored Products: The Workhorse for Sales

Sponsored Products are the foundation of Amazon advertising. For most sellers, this is where you start. These ads look just like organic search results, appearing in the shopping grid or on other product pages.

Their main purpose is simple: drive direct sales. Because they blend in so well, shoppers who are ready to buy click on them frequently. If you’re launching a product or want to give an existing one a sales lift, this is your starting point. A staggering 80%+ of all ad clicks on Amazon go to Sponsored Products.

You can learn more about building a strong foundation in our guide to Amazon Sponsored Products ads.

Sponsored Products Ads are the most frequently used, as they account for most of the sales and organic rankings, with nearly 70 to 80 percent of the budget allocated to these ads.

2. Sponsored Brands: For Building Brand Awareness

Next up are Sponsored Brands. Think of these as your brand’s billboard. These ads usually appear as a banner across the top of the search results, featuring your logo, a custom headline, and up to three of your products.

The power here is in brand discovery. When a shopper clicks your logo, you can send them to your Amazon Storefront to see your entire product catalog. You can also use Sponsored Brands Video ads, which are short, auto-playing videos that appear in search results and can really grab a shopper’s attention.

Use Sponsored Brands when: You want to build brand recognition, drive traffic to your Amazon Store, or showcase a collection of products together.

3. Sponsored Display: For Retargeting and Reach

Finally, we have Sponsored Display ads. These are your tool for reaching shoppers both on and off Amazon. Their primary function is retargeting. You can use them to show ads to shoppers who visited your product page but didn’t buy, reminding them of your product.

These ads can appear on a competitor’s product page, the Amazon homepage, or even on third-party websites and apps. It’s an effective way to stay top-of-mind and bring interested customers back to your listing.

Use Sponsored Display when: You want to retarget past visitors, cross-sell your products on competitor pages, or reach audiences beyond Amazon’s search results.

Your Guide to Sponsored Products Campaigns

Sponsored Products are the most commonly used ad type on Amazon and often the first step in any PPC strategy. Your initial campaigns aren’t just about driving early sales, they’re the foundation for collecting data, testing keywords, and understanding what convinces shoppers to move from a click to the “Add to Cart” button.

Let’s walk through building a solid Sponsored Products campaign from the ground up.

1. Automatic vs. Manual Campaigns

You’ll face a choice between two campaign types: Automatic and Manual. Most experienced sellers run both at the same time, as they work together.

1. Automatic Targeting: With automatic campaigns, you let Amazon handle targeting. You set your product, budget, and bid, and Amazon’s system decides where to show your ad based on shopper searches and related products. These campaigns act like a research tool, helping you discover keywords and placements that drive clicks and sales. Automatic campaigns has four match types and you have to target one match type per campaign not all together.

I. Close Match
Your ad shows when shoppers search with terms closely related to your product.
Example: A “wireless mouse” ad appears when someone searches “Bluetooth mouse.”

II. Loose Match
Your ad appears for broader or less direct searches.
Example: That same “wireless mouse” ad shows up when someone searches “computer accessories.”

III. Substitutes
Amazon places your ad on product detail pages of items similar to yours.
Example: Your “wireless mouse” ad appears on a Logitech mouse’s detail page.

IV. Complements
Your ad is shown on pages of products that pair well with yours.
Example: Your “wireless mouse” ad appears on a laptop or keyboard product page.

2. Manual Campaigns

Unlike automatic campaigns, manual campaigns give you full control over where your ads appear. You decide which keywords or products to target, set your own bids, and guide Amazon’s algorithm instead of leaving everything on autopilot. This makes manual campaigns ideal once you’ve gathered data from automatic campaigns and want to focus on what works best.

I. Keyword Targeting: Here you tell Amazon which search terms you want your ad to show for. You can choose different match types — exact, phrase, and broad (explained in coming section), to control how closely the shopper’s search must match your keyword.

Example: If you target “wireless mouse” as a keyword, your ad may show when a shopper searches that exact phrase, or in broader variations depending on the match type you select.

II. Product Targeting: Instead of targeting keywords, you can place your ads directly on specific products or products in a category. This is powerful for showing your ad next to competitors or complementary items.

Example: If you sell a “wireless mouse,” you can target detail pages of Logitech or HP mice (competitors), or laptops and keyboards (complements).

A classic strategy is to launch an automatic campaign first to “harvest” profitable search terms. Once a term proves it drives sales, you move it into a manual campaign where you can bid more confidently.

2. Keyword Match Types (Broad, Phrase, Exact)

In your manual campaigns, you tell Amazon how closely a shopper’s search should match your keyword. There are three options.

Let’s say we’re selling a “silicone baking mat.”

Match Type	Example Keyword	What Shopper Searches Could Trigger Your Ad
Broad	silicone baking mat	“oven safe mat,” “non stick silicone sheet,” “large baking mat”
Phrase	silicone baking mat	“large silicone baking mat,” “silicone baking mat set,” “red silicone baking mat”
Exact	silicone baking mat	“silicone baking mat,” “silicon baking mat” (and very close variations)

Broad Match gives Amazon the most freedom. Phrase Match is stricter, requiring the search to contain your keyword phrase in the correct order. Exact Match gives you the tightest control.

3. Placement Settings

Amazon enables you to raise your bid at specific locations on the platform and assign a percentage for each placement. The three types of placements are detailed below.

• Top of Search (First Page): This term describes the prominent position at the start of search results. This location is highly desired due to its superior conversion rate, leading to consistently high bidding activity for this spot.
  

  

• Product pages: This includes the detail pages of your competitors’ products or those that are complementary, offering opportunities for strategic placement.
  

  

• Rest of search: This encompasses all other positions within the search results beyond the first page. Here, you have the option to raise your bid by a certain percentage, up to 900%, for placements that demonstrate strong performance for your objectives.
  

  

Let’s understand the placements with an example. If you set a bid of $2.50 for an Amazon ad and you apply a 30% increase for the “top of search” placement, the adjusted bid for this specific placement would be calculated by increasing the base bid by 30%.

Here’s how it works:

• Original Bid: $2.50
• Increase for Top of Search: 30% of $2.50 = $0.75

So, the adjusted bid for the “top of search” placement would be:

• Adjusted Bid: $2.50 + $0.75 = $3.25

Therefore, for top of search placements, your bid would be $3.25.

4. Bidding Strategies and Placement Adjustments

When setting up a Sponsored Products campaign, Amazon gives you the option to choose one bidding strategy during campaign creation. There are three strategies available, and the one you pick determines how your base bid will behave in the ad auction.

1. Dynamic bids – down only
   Amazon may lower your bid if a click seems less likely to convert. It never increases your bid above the amount you set.
2. Dynamic bids – up and down
   Amazon can raise or lower your bid in real time depending on the likelihood of a sale. For example, bids may increase by up to 100% when the placement is more likely to convert, and decrease when conversion is unlikely.
3. Fixed bids
   Amazon uses exactly the amount you set, with no real-time adjustment up or down.

Previously we discussed that your bid can change depending on the placement (where the ad shows, like top of search or product detail pages). On top of that, your chosen bidding strategy also affects how much you actually pay. Let’s look at both together in simple example

1. Dynamic Bids — Up and Down
   Amazon raises or lowers your bid in real time based on how likely the shopper is to buy.

Top of search: Amazon can raise your $2.50 bid by up to 100% → up to $5.00. If you also set a 30% placement increase, that $5.00 can climb to $6.50.

Rest of search: Amazon can raise by up to 50% → $2.50 can rise to $3.75. With a 30% placement increase, it could reach around $4.87.

Product detail pages: same as rest of search → $2.50 can rise to $3.75. With 30% placement increase → about $4.87.

2. Dynamic Bids — Down Only
   Amazon only reduces your bid if conversion chances look low. It won’t increase your bid automatically.

Top of search: stays at $2.50, unless you manually set a placement increase. With a 30% increase, it becomes $3.25.

Rest of search: can drop below $2.50. If you keep the 30% placement increase, your starting bid before reductions is $3.25.

Product detail pages: same as rest of search.

3. Fixed Bids
   Amazon always uses the exact bid you set. It doesn’t raise or lower it — but placement adjustments still apply.

Top of search: always $2.50, or $3.25 if you apply a 30% placement increase.

Rest of search: always $2.50, or $3.25 with the 30% placement increase.

Product detail pages: always $2.50, or $3.25 with the 30% placement increase.

Selecting an appropriate bidding strategy is crucial. For the majority of campaigns, it is advisable to use either ‘Dynamic Bids — Down’ or ‘Fixed Bids’ Only. However, if you have a substantial budget and aim to secure top positions aggressively, opting for ‘Dynamic Bids — Up and Down’ may be suitable, as these options tend to involve higher expenditures, as seen in the doubling of bids.

5. What is a Good Campaign Structure?

A well-organized Amazon PPC campaign structure is key for efficient management. It enables accurate performance tracking, effective budget allocation, and campaign optimization. Simplifying keyword and product identification, it improves ROI and targeting, controls spending, and boosts conversion rates. Here is best Amazon PPC campaign structure for best performance

• One Ad Group: One campign with one ad group.
• 5-10 Keywords: 5 to 10 maximum keywords for best performance
• One Match Type: Dedicate each each campaign to a single match type (e.g., a camaign for Broad match, another for Phrase match).

This keeps things organized and makes it easy to see which keywords and match types are performing best. For a deeper dive, check out our guide on Amazon PPC campaign structure.

6. Negative Keywords

Negative Keywords play a crucial role in reducing unnecessary ad expenses by indicating to Amazon the search terms for which you do not want your ad to appear. For instance, if your product is a premium “glass water bottle,” you might add “plastic” and “cheap” as negative keywords.

In negative targeting, there are two additional options: “Negative Exact” and “Negative Phrase.”

• Negative Exact prevents your ad from appearing when a user searches for the exact term you specify. For example, if “plastic water bottle” is set as a Negative Exact, the ad will not show when someone searches for precisely that term.
• Negative Phrase ensures your ad does not appear if the specified phrase is part of a search query. For example, if “cheap bottle” is set as a Negative Phrase, any search containing this phrase, such as “cheap bottle deals,” will not trigger your ad.

7. How to Create a Sponsored Products Campaign (Step-by-Step)

1. Log into Seller Central and navigate to the Advertising Console.
2. Click “Create campaign” and choose Sponsored Products.
3. Give your campaign a clear Name (e.g., “Product X – Auto Campaign”) and set a Daily Budget (a starter budget of $20-$30/day is a safe place to begin).
4. Choose your Targeting (Automatic or Manual).
5. If Manual, select Keyword Targeting. Create an Ad Group, add your product, and enter your 5-10 keywords with their match types and bids.
6. Select your Bidding Strategy. We recommend starting with Dynamic Bids – Down Only.
7. Hit “Launch campaign” and you’re live.

Guide to Sponsored Brands

Sponsored Brands ads help you showcase your brand and products at the very top of Amazon search results, within search results and product pages. These ads usually include your video or selection of products. Shoppers who click can either go to your Amazon Store or directly to a product detail page.

There are two main formats:

• Product Collection Ads – Show multiple products with your banner/video, logo and headline. Best for driving traffic to your Store or highlighting a group of items.

• Video Ads in Search Results/Product Pages – Play automatically in search results and on product pages. You can link them to a single product page or your Store. Short, engaging videos work best to grab shopper attention.

Guide to Sponsored Display Ads

Sponsored Display is Amazon’s audience-based ad type. Unlike Sponsored Products or Sponsored Brands, which mainly appear in search results, Sponsored Display lets you reach shoppers both on and off Amazon. These ads can appear on product detail pages, customer review pages, the Amazon homepage, and even third-party websites or apps through Amazon’s display network.

Key Formats

• Product Detail Page Ads – Show up right on competitor or complementary product pages. For example, if you sell protein powder, your ad could appear on the detail page of a competing supplement.

• Audience Ads (On and Off Amazon) – Reach shoppers who viewed your product or similar items but didn’t purchase. These ads can follow them across Amazon and partner sites, reminding them to come back and buy.

• Above the Fold / Homepage Placements – Sponsored Display can also appear in premium spots like the Amazon homepage or “buying guide” sections.

Targeting Options

• Product Targeting – Choose specific products or categories where your ad should appear. This works well for showing up against competitors or alongside complementary items.

• Audience Targeting – Target shoppers based on behavior, such as:

  • Views Remarketing – People who visited your product but didn’t buy.

  • Purchases Remarketing – People who bought from your category or your brand in the past.

  • Amazon Audiences – Prebuilt audience groups (e.g., “Pet owners” or “Fitness enthusiasts”) based on Amazon’s shopping data.

Using Reports to Make Smart Decisions

Getting your ads live is just the start. The real work is won by learning how to read the data Amazon gives you. Your campaign reports are a direct line into your customers’ minds; they show you what’s working and what’s burning cash.

1. The Search Term Report: Your Goldmine

If you look at only one report, make it this one. The Search Term Report shows you the exact search queries shoppers typed into Amazon before clicking your ad.

By digging into this report, you can:

• Discover new keywords: Find high-converting search terms to add to your manual campaigns.
• Identify negative keywords: Spot irrelevant terms that are wasting money.
• Understand customer language: Learn how real people search for your product to improve your listing copy.

2. Targeting Report

This report breaks down performance for each specific keyword or product you’re targeting in manual campaigns. It helps you quickly see which keywords are hitting your ACoS goals and need their bids adjusted or paused.

3. Placement Report

This report tells you where on the page your ads perform best. You can see if you’re getting more sales from the “Top of search” results versus placements on product pages. This data lets you adjust your placement bids to invest more where it counts.

4. Purchased Product Report

Sometimes, a shopper clicks an ad for one of your products but buys something else from your catalog. This report shows you when that happens, revealing interesting cross-selling opportunities.

To get a big-picture view of your campaign’s reach, learning how to calculate your Share of Voice is crucial. It gives you a broader perspective on your market presence.

What Are Bulk Operations?

As you scale, managing bids and keywords one by one becomes impossible. Bulk Operations (or bulk files) allow you to download your campaign data into a spreadsheet, make hundreds or thousands of changes at once (like adjusting bids or adding keywords), and then upload it back to Amazon. It’s an advanced tool but essential for managing large accounts efficiently.

Simple Steps for Campaign Optimization

Successful advertising isn’t a “set it and forget it” game. It’s an ongoing process of refining your strategy based on what shoppers are telling you with their clicks.

Here are the key moves you should be making regularly:

• Adjust Bids Based on Performance: Let your ACoS be your guide. If a keyword is hitting your target ACoS, you can slowly increase its bid. If the ACoS is too high, lower the bid.
• Pause Unprofitable Keywords: If a keyword has a decent number of clicks but zero sales, it’s a hole in your budget. Pause it and redirect that spend.
• Harvest Profitable Search Terms: Regularly check the Search Term Report in your auto campaigns. When you find a customer search term that’s driving sales, add it as an exact match keyword to a manual campaign. This gives you much tighter control.
• Add Negative Keywords: This is the fastest way to improve your ACoS. Constantly look for irrelevant search terms in your reports and add them as negative exact or negative phrase keywords to stop wasting money.

Consistent monitoring is non-negotiable. If you’re managing multiple campaigns, performing a regular Amazon PPC audit is a structured way to identify wasted spend and find new growth opportunities.

What to Do Next

Amazon PPC is a skill that requires continuous learning and attention. Your first few weeks will be about gathering data, not making a profit.

Focus on these three things to start:

1. Launch an Automatic Campaign: Let it run for at least two weeks to collect initial search term data.
2. Analyze Your Search Term Report: This is your homework. Every few days, download the report and look for winning keywords and irrelevant terms to make negative.
3. Stay Consistent: Don’t make drastic changes every day. Make small, informed adjustments based on the data, and give the algorithm time to react.

By following this process, you’ll turn your ad spend from an expense into a profitable investment that drives sustainable growth for your Amazon business.