Welcome to Adswirt! In our previous article, we delved into the significant advantages of utilizing Amazon Advertising. This tool not only boosts the visibility of the products we promote but also offers a noteworthy return on investment and enables our brand to thrive within the Amazon ecosystem, pitting us against our main competitors.
Before delving into the next steps and discovering how to fully leverage the Amazon Advertising tool, it’s crucial to understand the key performance indicators (KPIs) that allow us to assess the performance of our advertising campaigns effectively. A clear understanding of these KPIs and the specific terms of Amazon Advertising enables us to set more precise objectives and fully comprehend our positioning on the world’s largest e-commerce platform.Whether you’re a business owner or a digital advertising expert, familiarizing yourself with the main metrics of Amazon Advertising is essential for laying the groundwork for our presence on Amazon and achieving the goals we’ve set. In this Adswirt article, we’ll explore the key terms and main KPIs that we should know to embark on a successful journey in Amazon Ads.
Some basic terms you should remember:
Search Bar: A bar where customers type in what they are looking for.
Home Page: The main page on Amazon which appears on www.amazon.com
Search Results Page: A page that contains a list of products matched to a customer’s search query.
Widgets: Web components that expand a website’s functionality (for example, ads).
ASIN: Amazon Standard Identification Number; A code used internally by Amazon to identify products on Amazon; same for all sellers and vendors offering the same product.
Child ASIN: An ASIN assigned to every variation of the product (every color, size, etc.).
Parent ASIN: A dummy ASIN used to group product variations of the same product.
SKU: Stock Keeping Unit; a code used by businesses in general to identify their products.
Product Detail Page (PDP): The Amazon page of a product; same page regardless of how many sellers or vendors sell the product.
GL: General Leverage; category of a product (for example, toys, beauty, etc.).
Buy Box: A box on the right side of a PDP, where customers can add items for purchase to their cart; not all sellers are eligible to “win” it.
Factors influencing the Buy Box: Pricing; Prime eligibility; Shipping terms and conditions; inventory availability; Account health (order defect rate, cancellation rate, late shipment rate).
Digital Advertising Metrics and Terms
Impressions: The number of times an ad was served (shown) to an audience.
Clicks: The number of times an ad was clicked on, bringing the audience to the ad’s landing page.
Landing Page: A web page that appears after an ad is clicked on.
Click Through Rate (CTR, %): The percentage share of impressions that was clicked by the audience; considered a measure of perceived ad relevance.
Bid: The maximum amount of money, which an advertiser is willing to pay for a single click on his ad.
Keywords: Pre-selected words and phrases relevant to the advertised products used for targeting the advertising to the right consumer group.
Customer Search Term (CST): The term that a customer uses to search for products in the search bar of a browser.
Ad Auction: The process of matching keyword-targeted ads to customer search, based on their relevance and the bid value set by the advertiser.
The Relevance Triangle: For an ad to be served, the CST, keyword, and the advertised product must be relevant to each other.
Cost Per Click (CPC): The amount of money, which an advertiser actually pays for a single click on his ad after the ad auction process.
Average Cost Per Click (ACPC): The average amount of money that an advertiser is charged over a number of clicks. eACPC = Advertising Spend / Clicks.
Cost Per Mille (CPM): The amount of money, which an advertiser pays per thousand impressions of an ad; used mainly in display advertising.
Advertising Budget: The maximum amount of money an advertiser is willing to spend on advertising his products.
Campaign Budget: The maximum amount of money an advertiser is willing to spend on a single campaign (per day – daily / in total – lifetime).
Advertising Spend: The total amount of money an advertiser has spent on advertising.
Advertising Revenue: The total amount of money an advertiser has spent on advertising, from Amazon’s perspective.
Gross Merchandise Sales (GMS): The total revenue generated by an advertiser through the sales of products; the monetary value of orders placed. Total GMS = Organic Sales + Attributed Sales.
Attributed Sales: Sales that can be attributed to (thought of as caused by) advertising.
Attribution Window: The time after an ad is clicked, when any sale is attributed to that click and the ad.
Organic Sales: Sales that cannot be attributed to (thought of as caused by) advertising; “natural” sales.
Order: A set of products purchased by a customer.
Ordered Units: The number of units of a certain product ordered by customers.
Conversion: The process of a click on an ad leading to an order.
Conversion Rate (%): The percentage value of clicks on an ad leading to an order. Conversion Rate = (Orders / Clicks) * 100.
Product Cost of Goods Sold (PCOGS): The monetary value a vendor receives from Amazon for the procurement of the vendor’s products.
Cost of Goods Sold (COGS): PCoGS + Amazon’s overhead costs for selling the product, such as warehouse expenses, inventory handling charges, shipping, etc.
Return on Advertising Spend (ROAS): A measure of return on investment (ROI) for advertising, indicating the monetary returns on every $1 of advertising spend. ROAS = Attributed Sales / Advertising Spend. The higher the ROAS, the better is the advertising performance.
Advertising Cost of Sales (ACOS, %): A measure of advertising performance that relates the cost of advertising to the sales produced by advertising. ACOS = (Advertising Spend / Attributed Sales) * 100. The lower the ACOS, the better is the advertising performance.
