2019 is already off to a promising start! As of this week, there are three different bidding strategies for advertising campaigns on Amazon as well as the option to adjust bids depending on placement.
The following bidding strategies are available:
- Dynamic bids - lower only
- Dynamic bids - increase and decrease
- Fixed bids
Adjustments of bids according to placements:
- Adjustment of the bid for the first search results page
- Adjustment of the bid for display on product detail pages
Thanks to the update, advertisers on Amazon now have even more optimization options when displaying ads.
Here you can find out what the different bidding strategies mean and which ones should be used when. We also take a look at the possibility of adjusting bids based on placement.
Amazon campaign bidding strategies
When placing sponsored product campaigns, advertisers now have the choice between three bidding strategies. An update that now provides different campaign bidding strategies was foreseeable. Different bidding strategies have long been available for Google Ads and Facebook Ads, and it was only a matter of time before Amazon also made this function available.
But now let's take a closer look at the different bidding strategies.
Dynamic bids - lower only
The "Dynamic bids - lower only" bidding strategy is the standard bidding strategy that was always used before January 2019. If we now use the "Dynamic bids" bidding strategy, Amazon will lower our bids for clicks that are unlikely to lead to purchases. This should lead to an increase in advertising cost efficiency. If a customer now searches for a keyword for which we are actively advertising, Amazon determines the customer's purchase probability (keyword type, placement of the ad, etc.) and lowers the bid placed if it can be assumed that a click will not lead to a purchase.
How does Amazon want to predict the probability of purchase?
Amazon itself says that it uses machine learning and several factors to predict this as accurately as possible. I cannot currently say which and how many factors are used. In addition to the keywords used, the placement of the ad, past performance and time of the query were also communicated.
Dynamic bids - increase and decrease
With the "Dynamic bids - increase and decrease" bidding strategy, bids are reduced for search queries that are unlikely to lead to a conversion. Bids are also automatically increased by up to 100% if Amazon assumes that the search term is likely to lead to a purchase. When displayed on the search results pages, Amazon increases the bid by up to 100% and on product detail pages by up to 50%. By selecting the "Dynamic bids - increase and decrease" bidding strategy, Amazon assumes that more sales can be generated than with the other two bidding strategies. I will be happy to publish whether this analogy also fits after the first test results.
Fixed bids
The "fixed bids" bidding strategy means that Amazon does not make any upward or downward adjustments. Ultimately, this means that the advertiser retains control of the bid. Amazon itself says that the "fixed bids" bidding strategy maximizes the number of impressions, but not the number of sales. Another advantage is that the "fixed bids" bidding strategy does not transfer control to Amazon.
In conclusion, it can be said that the "Dynamic bids - lower only" bidding strategy pursues the optimization of advertising costs efficiently. The "Dynamic bids - decrease and increase" strategy is intended to maximize sales, regardless of advertising costs. With "Fixed bids", optimization is kept in your own hands.
Bid adjustment according to placements
Amazon divides the advertising placement into three parts: 1. the first search results page 2. product pages and 3. other search results pages (from the second search results page).
The bid adjustment can be carried out for both the first search results page and the placement on product detail pages. The adjustment is made at ad set level after selecting the bidding strategy.
The standard bid submitted therefore applies to the other search results pages. Currently, bids can be adjusted up to 900% compared to the base bid. The bid adjustment by placement works in accordance with the selected bidding strategy. In the following, we will take a closer look at how the bids differ depending on the bidding strategy and placement.
In our example, we assume a standard bid of €0.50. We also want to increase our bid for the first page by 100% and for product detail pages by 10%.
The bids then look as follows, depending on the strategy and placement:
| Bidding strategy | |||
| First search results page | Further search result pages | Product detail pages | |
| Fixed bids | 1,00€ | 0,50€ | 0,55€ |
| Lower dynamic bids only | 1€ – 0€ | 0,50€ – 0€ | 0,55€ – 0€ |
| Dynamic bids - decrease and increase | 2€ – 0€ | 1€ – 0€ | 1,10€ – 0€ |
Explanation of the CPC bids of the "Fixed bids" bidding strategy
The standard bid is €0.50. With the "fixed bids" bidding strategy and a bid adjustment of 100% for the first page, the first search results page bid is €1. For the other search result pages, the bid is €0.50 (standard bid = bid for further pages). As we have defined a bid increase of 10% for the product detail pages, the bid for these is €0.55.
Explanation of the CPC bids of the "Dynamic prices - lower only" bidding strategy
For the first search results page, this results in a bid of 0-1€. The €1 comes from the bid adjustment of 100%. However, as the bidding strategy lowers the bids for ads that are unlikely to lead to a conversion, the bid can also be below €1. We have the same issue with the other search results pages (standard bid = bids for other pages + reduction of CPC bids) as well as with the bid determination of the product detail pages.
Explanation of the CPC bids of the "Dynamic prices - decrease and increase" bidding strategy
The bid for the first search results page is between 2€ - 0€, as the standard bid increases by 100% due to the bid adjustment for the placement =1€ (100% was defined by us, can go up to 900%). A maximum surcharge of 100% is added to the bid of 1€ through the bidding strategy "Dynamic bid lowering and raising".
For the "Other search results" placement, a maximum surcharge of 100% is added, as well as the potential reduction for search terms that are unlikely to lead to a purchase, resulting in a bid range of 1€-0€.
For the product detail pages, the 10% surcharge is added (from 0.5€ → 0.55€) as well as the up to 100% surcharge due to the bidding strategy (0.55€ → 1.1€)
Evaluate campaign performance based on placement
Of course, we not only have the option of submitting various bids for placements, but now also have the option of evaluating the performance of our campaigns based on the placements. To do this, we click on a "Sponsored Product Campaign" in the Ads Manager and select the menu item "Placements". There we now see a list of the campaign performance for each placement, with the option to adjust bids. The display looks as follows:
Conclusion on bidding strategies and bid adjustment per placement
This is really good news for advertisers on Amazon. Thanks to the expanded options, campaigns can now be analyzed not only at keyword level. Based on the latest updates (including targeting at product level), we also see the importance of Sponsored Product campaigns for Amazon. This is certainly not the last update we will see in 2019.
