Sponsored Products vs Sponsored Brands: Which one do you need?

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If you’re selling on Amazon, you need the right strategy to increase your revenue through the use of ads. Investing in ads will give you the edge and will make you stand out especially if your product is ranking and selling well on Amazon. This is why you need to know the difference between Sponsored Products vs Sponsored Brands.

With ad revenue higher than ever since the increase in demand for eCommerce all over the world, it’s a no-brainer, and yes, a good investment indeed!

Let’s have a glimpse of what we need to know about this topic.

Sponsored Products vs Sponsored Brands

Sponsored Products, Sponsored Brands, and the new Sponsored Display Ads provide plenty of opportunities to sellers to put their product in the limelight and in front of the right audience. But are all ad formats created equally? Most sellers and vendors in Amazon say it is not.

Sponsored Brands is always on the top spot on the search results page. More brand exposure is at stake as it gives the opportunity to send shoppers directly to your custom build brand store.

With so much potential because of the wide exposure, this format continues to be under-utilized. Why? Sellers and vendors who are using Sponsored Brands only derive 11% of their ad revenue from this format. To further explain why let’s take a look and dive a little deeper into the data

Sponsored Brands ads consist of three different formats, namely Product Collection, Store Spotlight, and Video. In this blog, we will be focusing on the most common format. We will be comparing Sponsored Products to Sponsored Brands Product Collection ads only. 

The analysis is based on the performance data of anonymized Sponsored Products & Sponsored Brands from close to 1,000 US advertiser profiles. It does not tie into any official performance statement from Amazon Advertising. 

Why Use Sponsored Ads

If you want to grow your brand awareness and yearning to build your marketing power then you should certainly start to utilize Amazon sponsored ads effectively. 

Amazon advertising has experienced remarkable growth in 2019. Its market share has jumped up, occupying 50% of the total share in the e-commerce industry. This only shows that the Amazon sponsored product ads and brand ads are the most powerful advertising tools for brands to increase their discoverability and drive more sales. 

With recent changes in the sponsored ads, Amazon’s footprint in the digital world is picking up. Presently, Amazon offers three different types of advertising solutions. 

  • Amazon Sponsored Products
  • Amazon Sponsored Brands (formerly called Headline Search Ads)
  • Amazon Sponsored Display

It has become extremely crucial for sellers to outsmart their competitors using paid advertising campaigns mainly because the competition is becoming tighter. As more and more sellers start their business on Amazon it is best to use strategies that will make you rise above them all.

This article will allow you to see an in-depth analysis of how Amazon Sponsored Products and Sponsored Brands work, as well as all the things you need to know to get started with sponsored ads. 

About Amazon Sponsored Ads

Sponsored ads are pay-per-click (PPC) ads that run on keywords and ASINs. They allow you to drive traffic to different sections like product listings, or search results within the Amazon platform. 

Sponsored ads in Amazon plays a vital role in the ad strategies of sellers and marketers. The demand and value are significantly rising as the years go by. This increase in value has pushed the CPC rates to be higher. As the rates increase, so as the value of sponsored ads.

More than ever, brands are investing and paying more money for their sponsored ads as it drives them closer to a lot of potential buyers around the globe.

During the seasonal sales, the CPC tends to be higher but the conversion rates are also on the higher side. This increased the importance of sponsored ads especially during seasonal sales like Cyber Monday and Black Friday where buyers are actively seeking what to buy. 

Amazon Sponsored Products

Amazon Sponsored Products are PPC ads that will help you drive traffic to your product listings on Amazon. Also, with Amazon Sponsored Products you can achieve a set of goals and will enable you to measure your performance too. 

Amazon Sponsored Brands

With Sponsored brand ads, you pay only when someone clicks on your ad. Note that these ads carry higher CPC (cost per click) than sponsored product ads as they have higher prominence than the latter. 

Amazon determines where the ads will appear and it depends on the bid amount.

2020 Sponsored Products vs Sponsored Brands Updates

Sponsored Product Ads Updates

Auto-targeting Campaigns – Negative keywords

Negative keywords were available earlier within manual campaigns. At present,  this feature is available for auto-targeting campaigns. You can set the keywords at the campaign level. With the new change, Amazon sellers all over will be able to make use of auto-targeting campaigns much even better. 

Ad Group changes for Vendors

Amazon is trying to merge ad platforms for both sellers and vendors. Before, this ad group segmentation was only available for sellers but now, vendors can get overall control and group products across different categories. 

Sponsored Brand Ads Updates

Taller Mobile Carousel

Since the majority of people are using their mobile phones frequently, Sponsored brand ads changed the way they appear on the mobile platform. The ads are bigger and are available in the mobile carousel format. This format is also a bit similar to the format available on the Facebook platform.

Suggested Bids

In sponsored brand ads, suggested bids will give an understanding of the visibility of the keywords that have at least one click and how they performed. The suggested bids will help you to identify the keywords that go well with the buyer search criteria. 

Amazon Store Spotlight

Amazon storefronts stand as a mini-version of your websites. Thus, the need to create brand stores is of utmost importance. 

Amazon store spotlight is a new ad format that creatively highlights a brand’s store. This will enable you to drive more traffic to your brand’s store and its subpages. It’s up to you to decide which pages or categories you want to drive more traffic. 

Performance of Sponsored Brands vs Sponsored Products 

According to Sellics, the median click-through-rate for Sponsored Products is 0.42%, and Sponsored Brands 0.38% – this means that when looking at average-performing ads from a perspective of a click-through-rate, Sponsored Brands perform inferior – with an 11% lower click-through-rate.

The worst-performing Sponsored Brands ads have a click-through-rate which is 33% lower than Sponsored Products. 

However, looking at the top 20% performers, the click-through-rate is 11% higher in favor of Sponsored Brands. This simply means the best performers perform better. In other words, as far as click-through-rates is concern the margin for error is greater with Sponsored Brands –. 

As you can notice, most shoppers generally don’t like to click on “ads”.  They don’t pay much attention to it. Also, Sponsored Brands are less covert than Sponsored Products. They look much more like traditional ads.

It is very important to remember that as a brand, you have to make an especially compelling offer to earn the click. It is like showcasing a fascinating brand store with a Store Spotlight Ad or displaying off a related best-selling product in a Product Collection ad. Good thing is that the format provides the resources to do so. Sponsored Brands have the potential to outperform Sponsored Products clicks-wise when done right.

Conversion for Sponsored Brands vs Sponsored Products

The median conversion rate for Sponsored Products is 13% higher than Sponsored Brands’. This gap is relatively consistent across different performance levels and this is no longer a surprise to the people behind this industry.

While conversion rate is important, it might also not be the best metric or benchmark for measuring the performance of Sponsored Brands’. Sponsored Brands ads are much more likely to have upper-funnel goals, such as creating brand awareness.

The brand awareness campaign is more likely to be a KPI (Key Performance Indicator) In fact,  Amazon suggests that using Sponsored Products and Sponsored Brands together increases overall conversion rate by 50% and ROAS by 24% based on their research.

This only means that the lower conversion rate doesn’t necessarily mean the ad’s not “working”. 

On the other hand, in the marketing funnel, you should always consider the possible difference in buyers’ intent. Say, for example, a shopper already knows what they want and are ready to buy, they just click on a Sponsored Product Ad, while clicking on a store or a banner-shaped ad could be a sign that the shopper is browsing and looking after some products or we could say that they are on the earlier stage of the purchasing journey.

CPC on Sponsored Brands vs Sponsored Products

The median cost-per-click is the same for both ad types at $0.64. The more significant variance will be by product category.

It is also important to note that for most other performance levels, including the top and bottom 20%, CPC is a bit lower for Sponsored Brands – between four and eight percent lower.

This is likely due to reduced competition. A lower adoption rate of the format means fewer bidders, fewer bids, and ultimately a lower price at auction.

Basically, a lower CPC spells huge potential to sellers in Amazon. 

Sponsored Brands vs Sponsored Products: ACoS

Comparing ACoS between the best-performers and worst-performers gives a mixed result. This is because ACoS depends on a range of different KPIs – mainly Cost Per Click (CPC), conversion rate, and Average Selling Price (ASP).

While conversion rates tend to be lower for Sponsored Brands, they also tend to have a lower CPC. The unique combination of these KPIs in a particular segment determines the ACoS. E.g. for the best-performers, Sponsored Brands have a 12% lower ACoS.

Get the Most out of Amazon Sponsored Products

The increase in CPC has become a new trend in 2019 and continuously trending in 2020. As an Amazon seller, you can take advantage of Sponsored product ads by setting specific goals, such as:

Increase visibility – with Sponsored product ads, you can position your ads on the top of search results. This means increasing your visibility significantly. If you use the right keywords to target these ad placements, you can convert more potential buyers and generate more sales.

Pay only for clicks – You only pay when your ads are clicked. This will save you from paying hefty amounts when your ads aren’t clicked.

Also, you can use sponsored products as part of brand awareness.

Optimize your Sponsored Products Campaign

Your default bid is how much you are willing to spend on the PPC campaign. 

Always bear in mind that the PPC strategy should align with the goals you set. Setting a higher bid to beat out other bidders for first page placement is not always the right strategy. Try to start low and adjust the bid amount to reach an optimal level. 

Get the Most out of Amazon Sponsored Brands

Try considering sponsored brand campaigns as part of your ‘top of funnel’ marketing process. Build brand awareness and target new buyers to improve your product discovery through the use of these campaigns. 

You might ask how?

Determine how much you want to spend on the campaign, your goals, what products you want to advertise, and the keywords you want to target is the first thing you should have in mind. Sponsored brand ads are usually structured with specific keywords to make them work better.

Final Thoughts

Some key metrics such as click-through-rate and conversion rate suggest that Sponsored Brands are worse performers. But the truth is for some product categories, Sponsored Brands perform even better than Sponsored Products. 

Sponsored Brands tend to perform better than Sponsored Products in terms of ACoS in categories where CPCs are lower and conversion rates are higher for Sponsored Brands.

  • Electronics (-42% ACoS)
  • Toys & Games (-35% ACoS)
  • Clothing (-32% ACoS)
  • Automotive (-14% ACoS)
  • Cell Phones & Accessories (-11% ACoS)

If you will look at the top categories most of them (4 of 5) have lower CPCs in Sponsored Brands than in Sponsored Products: This connotes a window of opportunity where advertisers can benefit from less competition.

You can also notice that there is also a higher conversion rate for Sponsored Brands in 3 of the 5 best performers. The reason is maybe because shoppers are more focused on brands in these categories and they value or respond positively to a branded shopping experience provided by Sponsored Brands Ads and brand stores.

However, running successful Sponsored Brands campaigns is certainly not limited to the categories identified above.

Sponsored brand ads generally have the goal of bringing out brand awareness and consideration. They are designed to prepare purchases that happen at a later stage – despite those conversions not being attributed directly to the Sponsored Brands ad.

As mentioned, research by Amazon suggests that using Sponsored Products and Sponsored Brands together increases overall conversion rate by 50% and ROAS by 24%.

It is good to remember that in addition to the bare metrics and ad profit mentioned above, Sponsored Brands ads have the potential to serve upper-funnel goals and that moving your ad strategy gradually up the funnel and this is one sure way to secure long term success on Amazon. 

Believing that Sponsored Brands plays second fiddle to Sponsored Products means a missed opportunity. Understanding their potential, it’s more useful to think of both formats as partners. 

It’s only a matter of time before more sellers and vendors catch on and go with the flow. Now’s your chance to hit the ground running and discover endless possibilities through the use of these ads in your Amazon business.

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