Data shows that the cost of Amazon Ads has increased by over 50% since 2020, thus, learning how to allocate your budget and utilize its full potential is important. During communications with our partners and clients, we uncovered that most of brands and sellers still don’t have a clear understanding of Sponsored Ads and Amazon DSP Ads, especially its differences in application.
We collected some of the most asked questions from clients below:
- We have never tried Amazon DSP Ads before. How can it help my business and brand grow?
- We’ve tried Amazon DSP Ads, but the cost is so high. It seems that Sponsored Ads have better ROAS. Why don’t we stick with Sponsored Ads only?
- We’ve wasted so much money on Amazon DSP; how can Anker and Oceanwing perform so well on it? How do I plan Amazon DSP and Sponsored Ads?
Let’s discuss this topic to help you build a big picture thinking, and then to find your own answers.
The mechanism behind Sponsored Ads and Amazon DSP Ads
As Covid-19 has moved consumers online, Amazon has become the 3rd biggest ad platform in the US in 2020. To achieve this, Amazon DSP ads play an important role.
Amazon DSP Ads
Similar to Google and Facebook ads, Amazon built their own website league as the so-called “inventory.” The inventory refers to all of the advertising spaces that can be sold to an advertiser. Thus, you do not only display your ads on Amazon, but you can also access the platform that displays ads on your site.
The majority of potential customers for your product are outside of Amazon. Fortunately, the Amazon DSP Inventory gives you access to a much larger audience that goes out of Amazon‘s own platform. Amazon DSP ads support various kinds of ads for a website. Its customization options include banner ads, display ads, videos, etc.
Amazon Sponsored Ads
The traditional Amazon ads only allow advertisers to target potential customers on Amazon.
The goal of Sponsored ads is to promote your listings, so it doesn’t offer any customization, regardless of your budget. Another significant difference between DSP and Sponsored Ads is the cost structure:
- DSP ads use a Cost Per Mille (CPM) cost structure. CPM is the average cost you pay to deliver 1,000 impressions of your ads.
- Sponsored Ads use a Pay Per Click (PPC) structure which is the average cost you pay each time someone clicks your ads.
The Targeting Audiences of Amazon DSP and Sponsored Ads
Since Amazon DSP Ads have a wider reach, there are two distinct ways to select a target group for both Ads.
Amazon DSP Ads
Amazon DSP Ads offers a more complicated targeting system to reach your intended audiences. It also allows clients to retarget audiences or even create their own target groups. It allows advertisers to build custom segments using Amazon demographic and user activity data.
Here are some useful examples of custom audiences:
- Customers visited your listing page but didn’t buy anything.
- Customers visited your competitor’s listing page but didn’t buy anything. Categorize customers according to their lifestyle tags.
- Customers created by uploading your own data, as well as lookalike audiences.
Sponsored Ads target relevant groups through keywords. You bid for certain keywords customers are searching for. The bidding results do not only rely on your budget but also on your account performance as a whole.
The Application of DSP and Sponsored Ads
Amazon DSP can better reach targeted groups with flexible customization. The only downside is it requires a large budget to operate. The Amazon Managed Services DSP option alone requires you to spend a minimum of $35,000 monthly. In contrast, the barrier to entry of Sponsored Ads is very low, starting from $1.
Sponsored Ads work on the basis of keywords, which means customers who clicked on your ads are already looking to buy. Thus, the ROAS of Sponsored Ads is much higher than DSP.
So, what’s the meaning of DSP?
You should ask yourself this question first:
Are you a sales driven or brand–driven brand?
The marketing funnel shows the process of how to turn visitors into loyal customers. For each stage, the marketing team uses certain methods to bring these customers closer to buying the product.
Sponsored Ads convert customers at the lower end of the funnel, which is important for sales–driven companies. But to ensure long-term prosperity, branding is also important.
Amazon DSP provides the opportunity to educate customers at the upper funnel and increase your market share. Especially for new product launches, DSP can especially help increase brand awareness, making it more appealing.
For example, a home appliance brand who is famous for instant pot would like to launch a new air fryer product. The brand tried Sponsored Ads first, and bid for air fryer related keywords. While, since the brand is new to air fryer category, it turned out that they failed to bid on most of these keywords. What’s more, their costs of on Sponsored Ads are extremely high. At this point, Amazon DSP can be a good solution.
After all, we recommend setting your advertising strategy with the perspective of a big picture. Setting up your goals like this perspective can help with both long-term and short-term goals. So be sure to do your research about the product and industry.