Creating a Campaign and Setting Your Bid

When you set up a PPC campaign, you have to choose a keyword or group of keywords relevant to your product. You will also need to determine how much you are willing to pay per click on your ad. That is your bid.

Manual Bidding: Choose the maximum you’re willing to pay per click.

Automatic Bidding: Here, Amazon would automatically set bids for you based on budget and competition.

As your bid increases, so does the probability that your ad will appear in the desired positions. But that’s not all-the cost of your bid is only half the story.

Quality Score: Relevance Counts

Amazon doesn’t just take into account your bid when it decides which ad to show. It also considers how relevant your ad is. Amazon employs a metric called “Quality Score”, which takes into account the following:

Keyword Relevance: How closely your selected keywords align with the customer’s search query.

Ad Relevance: Whether the product in your ad matches the intent behind the search term.

Landing Page Experience: How well your product page matches the ad’s promises and whether it’s optimized for a good shopping experience (e.g., fast loading, clear product details).

The more relevant, the more likely your ad will be shown, even if your bid is lower than that of competitors. This ensures a better experience for shoppers, as Amazon strives to show the most relevant products in response to a search.

 The Auction Process

Every time a customer searches on Amazon, an auction takes place in real-time. Here’s what happens:

Amazon gathers a pool of ads that are relevant to the search query based on keywords and product relevance.

For each ad, Amazon calculates its Total Bid, which is a combination of the bid amount and the Quality Score.

Ads are ranked by their Total Bid, with the highest-ranked ads getting more prime placements (e.g., at the top of search results or on product pages).

This does not mean that it is the money of the highest bidder that goes to win always. Relevance plays a lot. If there are two identical bids but with a different quality score, this will take it to the front in the auction.

Cost Per Click (CPC)

This means you would pay not whatever amount you wish for each click but whatever lowest possible to be in your place in ad, and usually above the highest placed of all competing bids.

For example, if you bid at $1.50, the next highest bidder may have quoted $1.25, and so you might pay only $1.26 for a click. It is called the “second-price auction” in which sellers will not overpay for clicks.

Winning the Auction

The moment the auction is closed, Amazon serves the ads on the search results or product pages. The highest Total Bid gets served in the most prominent positions; this includes the bid and Quality Score.