PPC (Pay-Per-Click) is an online advertising pricing model where the advertiser pays a fee each time a user clicks on their ad. Unlike CPM (cost-per-thousand-impressions), where you pay for exposure regardless of interaction, PPC only charges you when someone actively clicks through to your listing or landing page.
PPC on Amazon
Amazon's advertising ecosystem is primarily PPC-based. The three main Amazon ad types that use PPC:
- Sponsored Products: Ads for individual ASINs appearing in search results and on product pages. The most widely used Amazon ad type.
- Sponsored Brands: Headline banner ads with brand logo, custom text, and a product carousel, appearing at the top of search results.
- Sponsored Display: Ads that appear on and off Amazon (on competitor pages, on third-party websites via Amazon DSP) targeting audiences and specific ASINs.
How Amazon PPC Bidding Works
Amazon uses a second-price auction: you set a maximum bid (the most you are willing to pay per click), but you typically pay slightly above the second-highest bid — not your maximum. For example, if you bid $2.00 and your nearest competitor bids $1.50, you pay approximately $1.51.
Bid strategies:
- Fixed bids: You set one bid and Amazon charges that amount for every click
- Dynamic bids (down only): Amazon lowers your bid when a click is less likely to convert
- Dynamic bids (up and down): Amazon raises or lowers your bid based on conversion probability — can increase spend significantly
Key PPC Metrics
| Metric | Definition |
|---|---|
| CPC (Cost Per Click) | How much you paid per click on average |
| CTR (Click-Through Rate) | Percentage of impressions that resulted in a click |
| CVR (Conversion Rate) | Percentage of clicks that resulted in a purchase |
| ACOS | Ad spend as a % of ad-attributed revenue |
| ROAS | Revenue generated per dollar of ad spend |