Today, more and more marketplaces offer the opportunity to promote your listings and achieve more visibility. On platforms like Amazon, advertising is essential, as competition is extremely high, and you often need to buy your way into the attention of visitors. Amazon has a whole advertising platform, offering more than just showing your listing on top of the search results. Its other Retail Media offerings include brand advertising (Sponsored Brands), showing your ads beyond Amazon (Sponsored Display) as well as the Amazon DSP (Demand-Side Platform) which allows any online advertiser to show their ads to visitors to Amazon and a whole network of affiliates.

It is estimated that in the early 2010s, in USA for the first time most product searches were started on Amazon, and not on Google or another search engine. It is not a surprise that Retail Media used a lot of the fundamentals established by Google: the keyword-based advertising, the bidding mechanism, the monetization method (primarily Pay Per Click), the way campaigns are created and designed. Of course, marketplaces also customized some of those and offered different positioning and formats to advertisers.

Nowadays marketplaces develop their own in-house advertising solutions, or integrate platforms like Mabaya and Mirakl Ads to offer this service to their sellers.

Should you advertise on marketplaces?

First of all, not all marketplaces offer this opportunity. But on the ones which do, it’s worth trying it out.

How to get started?

Define your advertising budget

It’s important to look at the big picture when you decide how much to spend. A popular approach is to define a certain percentage of your sales volume to be spend on marketing. This way you can also easily incorporate this into your P&L. It can also be included as a variable in your pricing. In this case the most important indicator in your ad strategy will be TACOS (Total Advertising Cost of Sale). It’s calculated as (Total Ad Spend / Total Sales) x 100 and measured as a percentage.

Alternatively, you might just focus on a small part of your product portfolio – for example, newly launched products, or a particular category. In this case you might want to focus on ACOS (Advertising Cost of Sale). It’s calculated as (Total Ad Spend / Total Ad Sales) x 100 and also measured as a percentage. Of course, ACOS will be significantly higher than TACOS, so you need to adjust your expectations.

In general, advertising should be contributing also to your organic sales – if the only growth is coming from paid ads, this is not sustainable in the long term.

Choose the type of campaigns you are going to run

The big decision here is whether to set up your campaigns manually, or to leave it to the platform algorithm – it will create an automated campaign.

With manual campaigns you can adjust every possible setting yourself – pick the products and keywords, set the bids, define a daily budget etc. It requires knowledge, time and effort, but in general can be more effective in driving sales at a lower cost.

Automated campaigns do most of the work themselves. So if you want to save time, or have no idea where to start, this might be the better option. In this case be prepared that the algorithm needs time to learn, so in the first 2-3 weeks don’t be surprised if you see mostly costs, and limited sales.

Of course, you can combine the two types.

Some advertising managers use an approach, which is widely debated in the advertising community. They set up automatic campaigns to “harvest” well performing keywords which they then use in manual campaigns which are adjusted to generate sales at a lower cost. Those keywords are “negated” in the original automatic campaigns to avoid duplication. This “negation” is the main topic of debates.

Which products to advertise?

There are countless opportunities here, but here are a few things to consider:

  • Advertise only optimized listings – with the proper title, images, description, bullet points etc. Otherwise you will be throwing money out of the window
  • It’s better to advertise listings with variations (different colors / sizes)
  • If you have a well converting listing which doesn’t have enough visibility, it’s perfect to put it in an ad campaign
  • Advertise newly launched products – to give them an early boost
  • Watch out for products with low stock – you might want to put them on pause or leave them out of campaigns altogether

What else to consider?

Give your campaigns some time – they need to generate a meaningful amount of impressions and clicks before you can make any well-grounded decisions.

If you have been running advertising for some time, but your TACOS keeps growing despite all optimizations, you might be falling in the addiction trap. Due to increased competition, in general the cost of advertising is going up, although it’s happening slowly. At some point it might become unsustainable to grow your ad budget, as it will not generate enough incremental sales to keep you going. Still, if you fully stop advertising, this might have devastating results to your sales, as you will lose organic ranks too. So consider lowering your bids instead of turning campaigns off.

If your brand is new to the market, or if you are facing increased competition, you might want to consider brand advertising as well. This will allow you to showcase your brand and build some awareness among shoppers. From a cost perspective, brand advertising is nowhere close to performance campaigns – they will produce far less sales for the same budget. But these campaigns will increase the visibility and conversion rate of your whole portfolio. Do not spend more than 10-20% of your advertising budget on branded campaigns, but try them and see the results.

Good practices

Develop a naming convention for your campaigns – this will make your life considerably easier when you start managing them actively, and have more than just a couple running at the same time. A popular approach is to include all campaign settings in the name: type of campaign, products / category, bidding type, placements etc.

Granulate your campaigns – the general recommendation is 1-5 products per campaign. This gives you better control and allows successful products to avoid being dragged down by slow movers.

Revisit your campaigns about 2 times per week for adjustments after the initial 2-3 week period which is required to gather some performance data.

Need help setting up your campaigns? Reach out to Marketplace Agents.