Amazon News & Updates

SPENDING ON AMAZON ADVERTISING? COSTS ARE RISING

Are you planning to spend on Amazon Advertising? Data from Tinuiti shows that spending on Amazon-sponsored product ads was up 30% among its clients during the same time period.

However, advertising costs on Amazon are also rising, Let’s have a look at the data.

Advertising on Amazon now costs, on average, $1.20 per click, up 30% from $0.93 at the start of the year and up over 50% year-over-year.

In the report, Marketplace Pulse says that advertising costs are rising as a result of more brands advertising on the platform. And, established brands and brand acquirers are investing larger budgets into Amazon advertising, further driving up CPC costs.

According to Marketplace Pulse research, the average cost-per-click (CPC) was $0.85 in 2020.

And, during the pandemic some brands run out of stock and pull back on advertising, it reached the lowest point of $0.70 in early May.

However, it recovered by mid-September and then reached distinctive peaks on Prime Day, Black Friday, Cyber Monday, and holiday shopping in December. After that, CPC settled at around $0.90 in Q1 2021.

The average advertising cost of sale (ACoS) was 22% in 2020. It started 2021 at 25% and has now risen to over 30%.

Yet, the average conversion rate has remained relatively stable at 12%-13%.

Thus the average cost of sale was $6-$7 in 2020 but has risen to $9-$10 – it takes eight clicks at an average price of $1.20 to generate one sale, up from $0.85.

The report concluded that, as Amazon advertising gains more prominence, customer acquisition costs (CAC) will continue to rise.

Before advertising gained prominence, CAC on Amazon was typically 15% – the transaction fee it charges for each sale. However, advertising has now pushed customer acquisition costs well beyond 20%, and it will only get higher.

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