Amazon Advertising Dynamic Bidding and Adjust Bid Strategies

Amazon Advertising Dynamic Bidding and Adjust Bid Strategies

There is a new feature for Amazon Sellers and Vendors called Dynamic Bidding and adjust spend options which is a tools for Sponsored Product Campaigns that allows sellers to better align advertising goals with keyword bidding options. As Amazon continues to build out features in the Amazon Advertising program, Sellers and Vendors have greater control and options over adverting. The new bidding options now include: ‘Dynamic bids - down only’, ‘Dynamic bids - up and down’ and ‘Fixed bids’. They also offer the ability to adjust the % likelihood of advertisement placement for the Top of search (fist page), product pages, and rest of search for Sponsored Product Campaigns. We recommend all sellers review their Advertising Strategy as every campaign for every seller is affected by the new updated changes.

In this post we will cover:

  • How Does The New Dynamic Bid Work

  • Overview of Each Bidding Options

  • How to Compare Performance of ‘Dynamic Bids - Up and Down’ vs ‘Dynamic Bids - Down Only’

  • Action Steps for Amazon Advertisers

How the New Dynamic Bidding Works

Amazon has the ability to predict the likelihood of ads converting by using machine-learning models trained on the purchase data shoppers generate when they shop. Meaning that Amazon tracks and sees all customer data to predict the likelihood using signals such as historical performance of that particular ad, ads similar to it, and the context of when the ad is displayed such as search term, placement, and time of day. The more customers shop, and the more data that is collected and models are improved upon, the better the prediction tool is for assessing whether an ad will convert to a sale. When the likelihood of the purchase is high, Amazon will increase your bid to help allow sellers to win that bid and have a high likelihood of conversion. If the likelihood of conversion is low, Amazon will reduce your bid price as the ad will likely not result in a purchase.

Amazon Advertising Bidding Strategies Overview

The new bidding strategies allow sellers and vendors to pick a strategy that best aligns with the goals of the campaign. This section will discuss at a high level what each bidding strategy is.

Dynamic Bids - Down Only

When a seller or vendor chooses the bidding strategy of dynamic bid down only, Amazon will reduce the bids in real time for clicks that may be less likely to convert to a sale. This type of bidding is what the legacy strategy was that Amazon has used up to this point and should be noted that all campaigns created before October 2018 are automatically now ‘Dynamic Bids - Down Only’. They would use your keyword as a maximum bid, but would decrease the bid if there were keywords that could be acquired at a cheaper cost. Let’s take an example to see how this would work. Say you sell a toaster oven and you have a bid of $1.00 for the keyword ‘toaster’. If Amazon sees an opportunity where the ad may be less likely to convert to a sale, they may lower the bid to say $0.20. An example of where this could happen is if the search query of ‘toaster’ is a less relevant search query compared to other search terms and products or when that particular ad placement does not perform well.

Dynamic Bids - Up and Down

Dynamic Bids - up and down allows Amazon to increase your bids in real time for clicks that may be more likely to convert to a sale, and conversely reduce them for clicks that may be less likely to convert to a sale. Say a toast oven seller offers a bid for $1.00 for the keyword ‘toaster’, Amazon could see an opportunity where there is a high likelihood of a sale, it could increase your bid to $1.50. The current settings of the program could adjust the maximum bid up twice the amount of the bid for opportunities on top of the first page of search results and up to one and half times for opportunities on all other placements.

Fixed Bids

This strategy will only allow Amazon to use the exact bid inputted by the seller or vendor and not adjust based on the likelihood of conversion. Amazon states that this strategy, relative to the other dynamic bidding strategies, are likely to get more impressions but fewer conversions.

How to Compare Performance of ‘Dynamic Bids - Up and Down’ vs ‘Dynamic Bids - Down Only’

Amazon has provided a recommendation for how to test the performance of the new dynamic bids options. They suggest taking an existing campaign - one that has been running under the ‘dynamic bids - down only’ for quite some time, change the bid type to ‘dynamic bids - up and down’ for an amount of time (several weeks) and then compare the performance over the same period for the strategies. Limit the changes made on those campaigns to isolate the variable to just the bidding strategy. Compare impressions, clicks, cost per click, and sales to see which one best aligns with your campaign goals.

Amazon recommends not creating a new campaign to compare with another campaign. For example, creating a new campaign with ‘dynamic bids - up and down’ and comparing it with an existing ‘dynamic bids - down only’ campaign would not be good comparison set. Amazon’s predictive algorithm that optimizes bids looks at the historical performance of that individual campaign, and will naturally perform better then the newer campaign.

Adjust Bids by Placement

Placements are the different locations your Sponsored Products Advertisements can be placed. The different options include: top of search results (page 1), product pages (inside product listing pages or other locations like add-to-cart page), and rest of search (the middle or bottom of search results page). The Adjust Bid by placement allows sellers to enter a percent increase to the base bid for placements of top of search (fist page) and product pages. The maximum sellers are allowed to enter is up to 900% increase or 10x of the base bid. This program is replacing the Bid+ program. The Adjust Bids program is used in conjunction with the Dynamic Bidding Strategy chosen.

Action Steps for Amazon Advertisers

Now that Amazon has offered this new bidding and placement options we suggest a few action steps including:

  • Amazon Advertisers should review their Amazon Advertising Sponsored Products Campaign settings as all campaigns have been adjusted to these new tools.

  • Review Amazon Advertising goals (impressions and brand building vs sales and business growth)

  • Test new bidding strategies to optimize advertising goals

Reach Out To Goat Consulting With Any Questions

We have spent a lot of time understanding this new bidding and placement program and are Accredited through the Amazon Advertising Sponsored Ads Training. If you or your business has any questions regarding this program, please do not hesitate to reach out.