Budget Allocations for Sponsored Products vs. Sponsored Brands vs. Display — What’s the Right Mix?

Budget Allocations for Sponsored Products vs. Sponsored Brands vs. Display — What’s the Right Mix? Speaker 1: Alexa, play That Amazon Ads Podcast. Unknown Speaker: Which one would you like to hear? Speaker 1: The best one. Unknown Speaker: Okay, now playing That Amazon Ads Podcast. These gentlemen are completely changing the game. Speaker 2: After listening to That Amazon Ads Podcast, my ads are finally profitable. Unknown Speaker: I also heard they're pretty cute. Speaker 2: Kicking things off, the bread and butter of Amazon PPC, Sponsored Products. Stephen, in your opinion, what do you think the allocation of any given seller advertising account, how much of their budget should be going to Sponsored Products? Speaker 1: Pretty much all of it. You know, just bet it all on Sponsored Products and forget everything else. That's the end of this episode, guys. Thank you so much for listening. We'll catch you next week. Just kidding. Yeah, it's Sponsored Products. I mean, we have done this test. Gosh, I can't tell you how many times and how many. Large data sets we've used aggregating thousands of advertisers, but by and large across the board, no contest, Sponsored Products has the highest conversion rate. It can be around 10 to 20% higher conversion rate than Sponsored Brands and up to 50% higher conversion rate compared to Sponsored Display. So it's where the conversion is, that's where most of your budget should be going. People will say as a general kind of best practice, 70 to 80% of your total spend should be going to sponsored products. I think in the accounts that I'm managing, it's probably closer to 80 to 90% of that budget is going to sponsored products. And there's a lot of reasons for that. The first one is just highest conversion rate, short and simple. But Andrew, there's a few other reasons for why most of that budget should be going there. What are the other ones? Speaker 2: Like you said, there's a lot of reasons. As to why you might not be using Sponsored Brands, Sponsored Display, it could just be like you don't have a lot of creative with this brand or whatever that you're working on, but Sponsored Products are number one, just the most native placement. They look very similar to the normal organic listings. As people are scrolling through, I often, you know, ask my family members and friends who aren't in digital marketing, like, Can you tell which of these are ads? And sometimes they don't really notice, especially as you get older in age, they don't really pay attention to that. Speaker 1: It's a little bit ageist, but okay. Speaker 2: Yeah, a little bit, little bit. But when you look at a sponsored brand ad, most people kind of know that that's an ad showing up at top of search or like a video. People are really accustomed to seeing those video ads and they know their ads. But sponsored products are very similar to organic placements and so they're much more natural for people to click through and click on because they don't think they're being advertised to. Now, the second thing, Stephen, is ad inventory. What can you tell us about that? Speaker 1: Yeah, that is just the biggest thing. I mean, before when Andrew and I were working at a large agency together, you know, our client had, it was like a $12 million annual budget. So we were averaging, you know, a million bucks a month on ad spend. And the Amazon Ad Reps were constantly trying to get us to put more into Sponsored Brands and Sponsored Display. And they were suggesting that only 50% of our budget should go into Sponsored Products. The other 50% should go into everything else, DSP, Sponsored Display, Sponsored Brands. And I mean, It's Amazon Ad Reps. Their job is to sell the less favorable ad types. In fact, these ad types have been so much less favorable that a couple of years ago, Amazon to make Sponsored Products not seem like the ROAS was as high as it is on Sponsored Products, shortened the attribution window from, it used to be all three ad types had a 14 day sales attribution. So if someone clicks the ad and within 14 days purchases it, it counts. So if they buy it on day 10, you know, after clicking the ad that that sales attributed and they shortened the attribution window for Sponsored Products to only seven days. So that if someone buys the product eight days or more after clicking on it, that would not get attributed to the sponsored product. So that lowered the ROAS or increased the ACOS a little bit on it, trying to, you know, convince people, see, Sponsored Brands is actually not as bad as you thought. It's actually pretty good, but it was really just a little gimmick with the attribution. I digress. The main reason why we disagreed with the ad reps was not just because of performance, all these things. It was very, very obvious that the amount of ad inventory or how many total placements are possible and therefore how many clicks are possible is It's like 10 to 20 times higher on sponsored products. If you just think about all of the possible impressions, like even just top of search, just top of search, you've got one sponsored brand ad that can max, like at a max get one click. And let's just say the click is $2. It's a competitive, you know, $2 CPC click. Great. And then you've got four in a lot of competitive search terms for it's actually five now. It depends on which screen size you're using. It depends on how big the screen is, but yes, four or five sponsored product potential placements on top of search. Now, let's just say, There's five of them and the average CPC there is a dollar. Okay. So it's, it's 50% cheaper than the sponsored brands. You can still get up to five times as many clicks. If someone, if someone were to go and click every single one, then your sponsor brand, there's $2 of total spend there. And then $5 of total spend on sponsored products. Assuming someone clicked all, all five. Um, I mean, obviously people aren't going around clicking every single listing. They might be though, opening up multiple tabs, whatever point being there's, Five divided by two, two and a half times the amount of total potential spend, even with a lower CPC. It's two and a half times more total spend potential on Sponsored Products, just top of search, Sponsored Brands, top of search, just top of search, just above the fold. You get into the rest of the search page, there's gonna be maybe one more Sponsored Brand opportunity in there in the form of a Sponsored Brand video somewhere in search. And then there's gonna be another 30 Sponsored Product placements. And so you see that like just the pure potential to spend, you know, easily 10 times more on sponsored products relative to sponsored brands. It's just a natural occurrence. And then if you're also optimizing the bids and pushing more where the ROAS and the conversion rate are higher and reducing elsewhere, then that's just going to further allocate more spend towards the best performing ad types. So you can see right there that if you were just doing sponsored brands and sponsored products, and you were letting the bids naturally go where the performance was the best and just naturally optimizing towards maximum sales volume within that target ACOS, Then, very naturally, based on conversion rates, based on inventory, you would probably end up with 90% of spend going to sponsored products and only 10% going to sponsored brands. I got a little heated there, kind of, but. Speaker 2: A little bit. Speaker 1: Anything to add there, Andrew? Speaker 2: Yeah, man. The only thing I would add here, too, is just sponsored products tend to have the cheapest CPCs. That'd be the only other thing I would add to, but that kind of leads us into the next ad type, which is sponsored brands. Now, for Sponsored Brands, just as Stephen was saying, there's a lot less ad inventory, so naturally, your spend is going to be a lot less than what you could possibly spend on Sponsored Products. As a general rule, for brands that have good creative, and having good creative is absolutely essential to Maximizing the effectiveness of sponsored brands and sponsored brand video. If you don't have great creative, you know, I've seen some stuff where people you just got like a talking head video person just standing there describing the product. I've seen those. I do okay in certain industries that aren't super competitive, but if you're in a competitive niche, you really have to have attractive images, attractive videos that are engaging and are going to loop people in. Otherwise, you're just going to be wasting a lot of money on this ad type. This is the most expensive ad type in AMS right now. You know, the CPCs for that type of search placement and those video placements are Our premium placements. And so, you know, naturally, you know, you're going to shy away from those a little bit more if your conversion rates don't support and the creative doesn't support a strong click through and that type of stuff. Now, the other reason is that there's just a lot less inventory there. There's only, like Stephen said, a top of search placement, a rest of search placement, and then sometimes you'll have those, you know, bottom of search placements with sponsored brands, but I haven't really seen those do super well. Now, From my perspective, I've been leaning into sponsored brands a lot more lately with particular clients that have the creative to support it. There's a lot of new AI tools that are claiming to be able to create great videos and that type of stuff. We'll see how that progresses and could make it a more competitive landscape. I've been leaning into those Top of Search, Sponsored Brand video placements because they have a really strong impact on influencing conversions, not just within Sponsored Brands, but within Sponsored Products as well. You're hitting the customer in multiple different formats, multiple different ways. You're inserting your brand into the mind of the customer several different times if you're actually occupying those Top of Search, Rest of Search, Top of Sponsored Product placements. You're gonna see a lot more of an impact across ad types. Speaker 1: I'm gonna kind of take a step back to what I was saying earlier where I was talking about different conversion rates and average CPCs across these different ad types. I did end up finding some of this data. It is out of date. So this data I'm about to read to you is from the period of May, 2022 until February, 2023. Now, what we plan to do as of this moment And what we're gonna do is look at how many brands do we have on AdLabs? I think it's over 1,000. It's gotta be over 1,000 total brands and advertising profiles. So we are going to take the total advertising data across all of our brands. We are going to break them up into different, what's the word for it? Cohorts. So we're gonna take different brands based on how much ad spend they're doing. We'll do one cohort. So smaller accounts versus whale accounts. And also average order values. So, you know, some, some brands, they have an average order value of $10. Some brands have an average order value of $300. So breaking this data out into different cohorts, and we are going to publish this data and show you guys for benchmark sake. So you can see which cohort you should be in. And then you can see what is the average conversion rate on each of these different ad types, as well as what's the different spend splits, what's the average CPC and Also just had a total level just so you can see how you're stacking up and we'll see if we can also, I don't know if it's possible. It might be. We'll see if we can also look into different categories. So like the supplement category versus other things. So if you want that data, make sure you like and subscribe so you don't miss it when we drop it. Um, we're probably going to be putting that sheet together in the next couple of weeks and then we'll, uh, we'll post it on LinkedIn and also we'll make an episode about it. So like, follow, subscribe, comment to get that. This out of date data though, just so you know, the sponsored products average CPC was around 88 cents. The Sponsored Brands average CPC was around $0.90. So very similar. Where that's not taken into account though is the Amazon Suggested CPC. So it's possible that for these brands in the example that they were just not getting as much visibility as they could with those lower CPCs. The average CPC for Sponsored Display, $0.98. So quite a bit higher than both Sponsored Products and Sponsored Brands. And then when you look at the average conversion rates on these, for Sponsored Brands, it was 8.5%. For Sponsored Products, it was 9.9%. So like we kind of said at the beginning, Sponsored Products is usually quite a bit higher. And then the average conversion rate for Sponsored Display, only 4.8%, less than five. So you can see for Sponsored Display going to Sponsored Products, you're getting pretty much more than double the conversion rate at a lower CPC, right? Sponsored Display has the highest, most expensive CPC. I'm not sure. I'm kind of jumping ahead here because we're not talking about Sponsored Display yet, but I don't know why everyone's always getting super obsessed with product targeting near the buy box with Sponsored Display campaigns. What our industry really needs to learn is there's a difference between sounds good and performs good. Too many people are making their strategies around something that sounds good, like everything just in theory, what seems to work versus what's actually driving results, which is why the theme of this podcast is there are best practices and there are practices that get the best results. Anyways, I don't know where I was going with all that. I just wanted to read those stats and let you know that for those reasons, yes, around 10 to 20%, you said 10 to 20% of budget to sponsored brands, right? Speaker 2: I think so. If I miss it, that's the recommendation. If you have good creatives. Speaker 1: And that 20% is really like the high end. And that's like, you've invested a ton of, you've invested a ton of resources into high, high quality media. So your videos, your images. The other thing too, is you're probably a larger brand that's trying to do a bit more brand awareness. So for the brand that we were working with, This Sponsored Brands was a big part of that strategy. And I think we were spending close to 20% of that budget there. But in that case, the KPI was not necessarily sales. It was how many impressions can we get? What can we do in terms of moving the needle on new to brand? And so those types of, I would say secondary KPIs, because obviously the primary KPI is always going to be total sales and return on ad spend. But the secondary KPIs, which are just how many impressions, how many viewable impressions, how many new to brand sales, those types of things, or even branded search volume. That was something else we were tracking. When we're running these sponsored brand ads, promoting our brand in non-brand search, does that lead three, six months down the road to an increase in branded search volume? But that's for large brands. For the average seller, dropping 10 to 20K a month on ads, That's not the strategy you want to do. You really just want to treat those sponsored brands pretty much just like a flashy sponsored product ad. So, you know, it doesn't get any preferential treatment. It's targeting the same ACOS and very likely because of the more competitive CPCs and because of the lower conversion rates, you're probably not going to be able to spend very much on it. Speaker 2: Yep. Very well said. All right, let's get into Sponsored Display now. Speaker 1: So for Sponsored Display, What is typically recommended around LinkedIn and these other things, other advertising gurus, they will say around five to 10% of your budget should go to sponsored display. God forbid anyone says more than that. Definitely seen it happen. We would say 5% is like the max. And again, all of this just depends on what kind of performance you're getting. If for whatever reason your sponsor display campaigns are just absolutely ripping, then naturally as you increase bids and increase budgets, it will take up more of your, it will constitute a larger portion of your budget. It's just We're optimizing for performance and so we let things fall naturally where they fall. We have not seen any magical boost when you do some weird thing like, oh, what if we do 50% of all of our stuff on Sponsored Display with the goal of just growing awareness and maximizing impressions. We've never seen that work out where, you know, even a longer timeframe stuff starts like performing, you know, wildly differently. Now, one final thing I'll say is just with that data set I was looking at previously, and again, we'll do a fresh data set that's more up to date using the kind of total brand averages for AdLabs. But from that fixed data set from a couple years ago, the average spend splits were sponsored products was making up 84% of spend across these. I think this was around 500 brands. Sponsored brands was only 12% of spend And Sponsored Display was 4% of spend. And I would say that's pretty accurate to what I've seen in the accounts that I'm managing where, yeah, Sponsored Products is 80-85%, Sponsored Brands 10-12%, and then Sponsored Display less than 5%. Andrew? Speaker 2: As we already alluded to, people like the idea of Sponsored Display and like the targeting capabilities, going after different audiences, showing up on your competitor's detail pages right around their buy box or A lot of times I see people using Sponsored Display for brand defense, making sure they're occupying those Sponsored Display placements on their own detail pages. There's a lot of reasons why I disagree with that, but in general, I think that the limitations with Sponsored Display in terms of tracking and audience segmentation They're getting better. Amazon added a new feature to Sponsored Display where you can create custom audiences and push them into your AMS campaigns, which is a step in the right direction, especially if you don't have access to the DSP and you can't really get into the refinement of the targeting. This is moving in a direction that is kind of parallel to that, but not nearly to the degree that DSP is at. Overall, like Stephen said, I haven't seen this ad type perform magically well even when you're starting to get into strategies that are a little bit more meticulous like only targeting customers who have worse ratings than you and lower reviews than you and all that type of different price points than you. It's still even doing that doesn't really open up a whole lot of opportunity for you to really profitably spend. Speaker 1: Very well said. And yeah, just one more kind of anecdote. I have a brand that I'm currently working with that has a not a small budget, probably averages like $100,000 a month. And it's in a very competitive category. It's not supplements or anything like that. It's not a repeat purchase thing, kind of a household appliance thing. It's a one-time purchase thing. And for sponsored products, even though these products have AOVs of $20 to $40, the CPCs can get up to like $4 or $5 for a sponsored product click, at least at top of search. They can't even get as high as $8, which is crazy. With Sponsored Brands, those CPCs get into like the $10 to $20 range. And then with Sponsored Display, it's like the $20, $30 range, which to me is just absurd. So let's just say if I was setting the same bid, if I just set a $5 bid across the board on everything, and actually let's just say I bid up to like $10 on Sponsored Brands and also $10 on Sponsored Display, which is actually pretty close to what we are doing. 98% of the spend goes to Sponsored Products because we're simply just being outbid on Sponsored Brands and Sponsored Display. And so even though we're being outbid, we still get some clicks, but the ACoS is like double what we can get with Sponsored Products. And we just, we cannot spend there because the CPCs are so high. And I don't know why everyone else is bidding that high. The Sponsored Display does not spend at all because we simply can't afford the CPCs to spend there. And when we try it, it just, it does not make, it doesn't make any sense. Yeah, less than 5% of that budget allocation is what we'd recommend for Sponsored Display. There was one other brand that I was auditing a couple of years ago where it was something like 30 or 40% of all their advertising budget was going to Sponsored Display. Remember this one, Andrew? Yeah. Speaker 2: Yeah, I think so. Speaker 1: Yeah. And the reason why was because the agency managing them at the time had VCPM campaigns turned on, which were like over-attributing. So these were all like retargeting. Uh, campaigns, which, uh, we have a couple of memes that we'll try to throw up here and, uh, you know, give, give a laugh for the, for the watching audience. But, uh, yeah, with, with these view retargeting, view-based sales attribution campaigns, and then even worse having automated systems that are just increasing the bids on low way cost items. These, these campaigns had like a 2% a cost relative to the average, like 20% targeted costs. So they just increased the bids over and over and over again and they were getting up to like $10, $20 bids, $10 to $20 CPCs for an account that averages a $1 CPC, but the ACOS was 2% and it was just cannibalizing all the organic sales. Like 80% of all the brand sales were getting attributed to ads and it was a pretty easy fix. I'm auditing it and I took over the management and we just gutted that, shifted the dollars back into sponsored products, optimized the placements and Yeah, their sales actually started going up. Tacos came down and everything was much better. So don't make that mistake. Speaker 2: All right. Well, that pretty much does it for this episode. Make sure you like and subscribe. Speaker 1: Do we want to talk about sponsored TV first? Speaker 2: Oh, that's right. I forgot that they added that. Speaker 1: Andrew, well, there's not much to say here, so we'll just give it the quick 10 second verdict and then we'll wrap things up. Speaker 2: I don't use it personally. I've tested it, not really somewhere I'm looking to allocate a lot of budget at this point in time. You got to have very well done creatives and a lot of people are not in that position currently. Speaker 1: It is not a sales tactic. It's an awareness tactic. So If you're a large brand really trying to grow that awareness, you could do it. Frankly, I'd rather push that. If you're gonna be doing that type of brand awareness play, I'd rather push that out on Facebook because those video ads are not clickable, right? On Facebook, they can click through, follow your page, go to your website. On the TV, it's just like, it's not very conducive for people being able to learn more about your brand or product or get the sale, so. I just test it and likely your test will say don't do it. So zero percent budget allocation. Speaker 2: All right. Smash that like button. We'll see you next time on That Amazon Ads Podcast. Speaker 1: See ya.