Understanding Amazon Ads: What Does 'Sponsored' Mean on Amazon?

March 8, 2023
Written by Ken Zhou
Amazon advertising home screen on a cellphone.

When looking for the best item on the Amazon marketplace, those at the top of search results are always our first options. It's an open secret: sponsored items are the first to appear, so we immediately think they're bestsellers or have good reviews. 

But what does 'sponsored' mean on Amazon?

Do sponsored products mean they're better? Who sponsored them, and why do they appear in your Amazon searches? Here's a quick guide to Amazon ads to help you better understand the system.

What Does Amazon Sponsored Mean? The Amazon PPC System 

Amazon sponsored product ads are paid ads that appear on top of Amazon shopping results page. ‘Sponsored' products are sponsored by the seller, not by Amazon.

Amazon advertising runs on a pay-per-click model, which means advertisers pay for every click on each ad on the e-commerce platform, depending on the price. Here's how PPC campaigns work.

The Bidding Process

To get a product listing or brand sponsored on Amazon, sellers must bid for keywords. The cost-per-click will depend on the price of the second-highest bidder. 

So if a seller wins a bid at $4.0 per click, beating the next-highest bidder at $3.50 per click, then the price advertisers have to pay $3.50 for each click on their advert even if the seller bids for $4.0.

Automatic and Manual Campaigns

Sellers can set their PPC campaigns in two ways: automatic and manual. Automated campaigns are straightforward: sellers give Amazon a budget and let the algorithm choose which keywords work best for their products. While this is easier to set up, it can become increasingly expensive over time.

Manual campaigns, on the other hand, are directed by the seller. Through keyword research, the seller researches their own keywords and decides if they are worth investing in for a PPC campaign and how much they are willing to spend on advertising.

Manual campaigns can take a lot of time and research but can be more profitable than automatic campaigns since the campaign manager has more control. A manual targeting campaign can also be great for other purposes, such as brand awareness, since automatic campaigns focus on getting your ad the most clicks.

Amazon PPC analytics on a laptop and paper.

3 Types of Amazon PPC Ads

Amazon sponsored product ads aren't the only ad campaign you'll encounter on Amazon. Currently, there are three types of Amazon sponsored ads.

Amazon Sponsored Products Ads

Amazon's sponsored products ads can be used for anything, from regular ads to product launches. You can see them at the top of your Amazon search results page, and there are usually only one or two slots per keyword. Clicking on the ad will take you directly to the product listing.

Amazon Sponsored Brand Ads

Amazon sponsored brands work similarly to product ads, except the ad is for a brand that sells products relevant to your search. Sponsored brands appear above the search results with a strip beside them showing their relevant products.

Running sponsored brands is great for raising brand awareness, especially in niche markets where users are looking for trustworthy sellers.

Amazon Sponsored Display Ads

Amazon sponsored display ads are the most recently developed among Amazon ads and perhaps the ones with the most extensive reach. Sponsored displays appear on the Amazon product detail page and websites of other Amazon brands and their affiliates.

How Ads Make Their Way To You: Amazon Keyword Match Types

Now you're probably wondering, in an ecommerce platform with around 2.3 million active sellers, how are your searches hitting the mark on their Amazon PPC campaigns? The answer is simple: keyword match types.

Keyword match types measure how relevant your searches are to an ad's keyword. Advertisers on Amazon use different keyword match types to ensure their ads reach their target audience and specific ad groups, whether it's a niche market or a general audience.

Currently, there are four keyword match types:

Broad Match

A broad match reaches a relatively general audience and allows top placements. Short-tail keywords are often used for this match type since fewer words include more variations and can attract more people.

Broad matches allow the following in searches:

  • Exact matches
  • Variations
  • Synonyms of the target keyword
  • Searches that do not include keywords

Running broad match campaigns is expensive due to the high volume of users the ads can reach. Broad matches average a high cost-per-click (CPC), cost-per-action (CPA), and a high number of impressions with low conversion rates.

Modified Broad Match

Modified broad matches are more relevant than broad matches since they require advertisers to include specific words to complete them. A campaign with modified broad matches can expect the same low conversion rates from broad matches and strong impressions, CPC, and CPA.

Both broad and modified broad matches are considered low-quality ads and often drive a seller's ACoS higher.

Phrase Match

A phrase match is a keyword match that demands more relevance than broad or modified broad matches. A phrase match allows the following to accompany the target keyword in searches:

  • Close variations of the target keyword
  • Paraphrases
  • Spelling and grammatical errors
  • Synonyms of the target keyword

A phrase match differs from broad and modified matches because it only allows close variations—ads won't appear on irrelevant searches.

Phrase matches typically garner lower impressions but have higher click-through rates. The philosophy behind this is that because phrase matches are more specific to their target shoppers, the chances customers are ready to buy are higher.

Because of their high conversion rates, phrase match campaigns have lower CPC and CPA.

Exact Matches

Exact matches are the strictest among all keyword match types. Exact matches need only the target keyword or very close variations. Otherwise, there won't be a match. Specifically, exact match campaigns do not show ads for searches with the following:

  • Variations of the target keyword
  • Extra keywords
  • Spelling errors
  • Synonyms

Despite the restrictions—or perhaps because of them—exact matches produce the healthiest PPC analytics. Campaigns on exact matches have higher click-through rates and a lower CPC and CPA.

The only drawback is the low volume of impressions, which is a given, considering exact matches target smaller audiences. Running campaigns on phrase and exact matches produces better quality ads, leading to a lower overall ad spend for sellers.

Revenue and advertising costs on a graph.

Should I Buy Sponsored Products on Amazon?

It is entirely up to you. 

It's a very understandable question, given that the term 'sponsored' can come off as a gimmicky marketing tactic. However, Amazon allows sellers to put their products and brand on display, regardless of their quality.

You can take comfort in knowing that Amazon strictly monitors products for sale to ensure customers never waste a single dime.

Let Seller Interactive Handle Your PPC Management

Maybe you didn't just read this article out of curiosity, and you're thinking of sponsoring your own products. If so, you've clicked on the right article. Seller Interactive offers Amazon PPC management as one of its services. Book a call with one of our Amazon experts to learn more! Let's talk today!

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