Amazon PPC Cost per Click: What a Click Costs and What Moves It

The question is asked as a number and answered, all over the internet, with a number: an average cost per click for Amazon, quoted to the cent, from somebody's set of accounts in some year. Amazon publishes no average. The figure a seller is quoted is the average of accounts that are not theirs, in categories that are not theirs, bidding on terms they will never bid on. It is not wrong so much as useless.

What can be said with confidence is how a click gets its price, what moves it, and how to read the only average that matters, which is the one in the seller's own reports. That is this article, and it ends with the reason the click is the wrong thing to be watching.

An Amazon click costs the next competing bid plus a small increment, up to your own bid as the ceiling, with placement adjustments multiplying the bid for top of search and product pages. So a cost close to your bid means the auction is competitive, and one well below it means it is not. Amazon publishes no average, and the averages quoted online are other sellers' accounts in other categories; the only figure that predicts your next click is your own, by term, in the campaign manager and the search terms report.

Six things move it: how many advertisers bid on the term, top of search placement, broad match entering stronger auctions, a new ad with no conversion history, the fourth quarter, and the category's margins, since high margin categories can afford higher bids. Brand terms are cheap because few others can win them.

Bringing it down without losing sales means paying less where clicks do not convert, cutting terms and placements that spend without selling, rather than bidding everything lower, which saves money and loses the clicks that sell along with the ones that do not.

Cost per click only matters against what each click earns, so it is read beside conversion rate and cost per order, never alone.

A useful monthly check is the ten terms with the highest spend: their cost per click, their conversion rate and their cost per order side by side, which shows at once which clicks are worth their price.

Sponsored ads on Amazon are sold in an auction that runs every time a shopper searches. Every advertiser with a bid on a term the search matches enters, and the ad shown in each placement is chosen from the bid and the ad's expected performance: an ad that shoppers click and buy from more often wins a placement over a higher bid that they do not. The price paid is not the bid. It is set by the next competing bid below the winner, plus a small increment, so a bid of two dollars against a next bid of ninety cents costs about ninety one cents.

That mechanism explains most of what sellers find puzzling. The bid is a ceiling, and the cost is usually below it. Raising a bid does not raise the cost by the same amount; it changes which auctions are won. And the cost of a click on the same term differs by hour, by placement, and by which competitors happened to be in the auction, which is why the report's average is an average of hundreds of different prices.

Since the click is priced by the auction and judged by the order, the bid is best worked out backwards from the order. Three numbers are enough, and all three are the seller's own.

The price. What the product sells for. Illustrative figures: $30.

The target advertising cost of sales. The share of the price the business is willing to spend on advertising to win a sale, set from the margin. If the product keeps 40 percent before advertising and the aim is to make a profit on advertised sales, a target of 25 to 30 percent leaves room. At 30 percent, an order may cost up to $9 in advertising.

The conversion rate on the term. The share of clicks on that term that become orders, from the search terms report. Suppose one click in ten.

The bid. If one click in ten converts and an order may cost $9, each click is worth up to $0.90. That is the ceiling to bid on the term. The auction usually charges less than the bid, so the actual cost per order often comes in under the target.

Adjust with evidence. A term converting better than one in ten can carry a higher bid; one converting worse needs a lower one, or a negative keyword if it never converts. Placement adjustments multiply the bid, so the ceiling at top of search is the bid times the adjustment, which has to stay within what the order is worth there.

Worked this way, a bid is a decision about value rather than a guess about what others are paying.

Competition on the term, first. A term ten brands bid on costs what the tenth brand is prepared to pay, and a term two bid on costs what the second is. Brand terms are cheap because the brand's competitors usually do not bid them; the category's head term is dear because everyone does. Second, placement: top of search costs more than the rest of the page, and product page placements are cheaper again, and the placement adjustments in the campaign multiply the bid for each. Third, match type: broad match enters more auctions, some of them against stronger competition, and its average click reflects that; exact match enters only the auctions the seller chose.

Fourth, relevance and conversion history. An ad that converts well on a term wins its auctions at a lower price, because Amazon weights the expected performance; a new product with no history pays more for the same placement until it earns one. Fifth, the season: the fourth quarter's auctions have more bidders with bigger budgets, and every click costs more from October to December on the same terms. Sixth, the category: a click on a supplement or a kitchen appliance is priced by the margin those sellers can afford, and a click on a phone case by a thinner one. The ad types article covers how the placements differ across Sponsored Products, Brands and Display.

Each Sponsored Products campaign carries a bidding strategy, and it changes the price of clicks as much as the bid does. Many campaigns run on whichever strategy was the default when they were made.

Dynamic bids, down only. Amazon lowers the bid in real time for clicks it judges less likely to convert, and never raises it. It is the cautious choice, and it tends to bring the average click below the bid.

Dynamic bids, up and down. Amazon raises the bid for clicks it judges more likely to convert and lowers it for others. Amazon says the raise can reach 100 percent for top of search on the first page and 50 percent for other placements. A campaign on this strategy can pay well above its bid on the clicks Amazon favours, which suits proven terms with good conversion and can surprise anyone reading only the bid.

Fixed bids. Amazon uses the bid as set, with no adjustment. It is useful when testing, because the price is predictable, and it misses the savings and opportunities the dynamic strategies find.

Placement adjustments on top. A percentage set for top of search or product pages multiplies the bid for that placement, before any dynamic change. A campaign with up and down bidding and a large top of search adjustment can pay far more there than the bid suggests.

Choose per campaign. Down only for discovery campaigns and new products, up and down for exact match campaigns on terms that convert well, fixed bids for controlled tests. Then read cost per click and cost per order by placement in the placement report, and adjust.

The campaign manager shows cost per click by campaign, ad group and target, and the search terms report shows it by the actual search that produced each click, which is the level at which it means something. Read it by term, sorted by spend: the ten terms that take most of the budget have a cost per click each, and the question for each is whether the sales the clicks produce justify it. A term with a high cost per click and a low advertising cost of sales is a bargain; a term with a cheap click and no orders is expensive at any price.

That is the reason the click is the wrong number to watch on its own. The number that decides whether a campaign works is the cost per order, which is the cost per click divided by the conversion rate, and it is read as the advertising cost of sales. A product that converts one click in five can pay four times the click price of one that converts one in twenty and still make the same margin. The article on campaigns that spend without converting is the diagnosis when the clicks are cheap and the orders are not there.

The same term costs different amounts in different weeks, and a seller who reads cost per click without the calendar beside it draws the wrong conclusions in both directions.

Events and the fourth quarter. Prime Day, Prime Big Deal Days and the weeks from Black Friday to the end of December bring more advertisers with larger budgets into every auction. Clicks cost more, and conversion often rises too. Judge those weeks on cost per order, not on cost per click, and set the targets for them in advance.

The weeks after. January is usually cheaper and slower. A campaign that looks efficient in January has not necessarily improved; the auction has thinned.

Budgets that run out. A campaign that hits its daily budget by early afternoon stops entering auctions for the rest of the day. Its cost per click can look fine while it misses the evening shoppers who would have bought. The campaign manager shows when campaigns go out of budget; a campaign that does so regularly needs more budget or narrower targeting.

Rules that adjust automatically. Amazon's budget rules can raise budgets for set dates, such as an event, or when performance meets a threshold. Set them before the event, not on the day.

Compare like with like. Read each term's cost per click against the same weeks of the previous year where history allows, rather than against last month. Movements that repeat every year are the market; movements that do not are worth investigating.

The clicks that cost most for least are the ones to remove, not the ones to bid lower on. The search terms report names the terms that took clicks and no orders, and negative keywords stop paying for them; the negative keywords article is the routine. Exact match campaigns on the terms that convert, with bids set from their own cost per order, take the auctions worth winning at the price they are worth; broad and automatic campaigns are for finding new terms, on a budget sized for research. Placement adjustments are lowered where the top of search does not convert better than the rest of the page, which for many products it does not.

And the listing is the lever most sellers forget. A better conversion rate lowers the effective price of every click twice: once because the cost per order falls, and again because the auction rewards the ad's performance with cheaper placements. The routine that reads all of this weekly and changes one thing at a time is the weekly PPC optimisation article, and it is the work of Amazon advertising management for the brands we run: not a cheaper click, but a cheaper order.