How does Amazon avoid invalid advertising? How to calculate it?

Nowadays, the competition on Amazon platform is fierce, so you need to spend money on promotion. However, not every promotion is effective, and many advertisements are ineffective. How can Amazon avoid ineffective advertisements?

How does Amazon avoid ineffective advertising?

1. Cannot bring orders to the store

The evaluation criteria for the traffic brought by the advertisements is whether the users make a purchase in the end. Users click on the advertisements to enter the store, which consumes the advertising fee, but the store does not make any orders. The user traffic is set to place orders for competing products at the bottom of the listing details page.

How to evaluate whether there is invalid traffic in advertising traffic?

Gross profit = sales - product cost - first leg - FBA delivery fee - Amazon commission - return rate.

Gross profit margin = gross profit/sales*100%

ACOS = cost/sales*100%

The above formula can be used to determine whether advertising is a loss-making process and whether the traffic brought by advertising can effectively promote the natural traffic of the store. If ACOS>gross profit margin, it means that advertising is likely to be a loss-making process, but advertising traffic does promote natural traffic, so in the early stages, such as when new products are launched, there are necessary losses.

Similarly, using the ACOS formula: ACOS = CPC / (conversion rate * selling price)

You can find the break-even point for advertising spending, and determine what conversion rate (CR) the product listing needs to achieve for advertising to be profitable. Then, you can make corresponding optimizations in terms of SEO, product selection, and keyword accuracy.

For example, if the ACOS is 30%, the selling price is $20, and the CPC is 1, then the conversion rate is 30%=1/(CR*20), that is, CR>=16.67%.

In other words, the conversion rate of traffic brought by the seller's advertising needs to reach 16.67% to ensure that the advertising output is greater than the advertising consumption, so as to determine whether there is invalid traffic in the advertising traffic.

2. Keyword weight decreases

The weight of Amazon keyword advertising is affected by the click-through rate CTR in the early stage and the conversion rate CR in the later stage, as well as the keyword relevance.

Under normal circumstances, Amazon will not and will not demote sellers, but if a seller’s store infringes on rights or violates platform policies and rules, it will be demoted invisibly.

Amazon also prefers effective traffic. For example, for effective traffic and invalid traffic, under the same advertising fee, the commission and delivery fee income of effective traffic is 4 times that of invalid traffic, and the total revenue is 2 times.

Under the same traffic, the conversion rate and sales of effective traffic are at least 4 times higher than those of invalid traffic.

Moreover, Amazon’s business philosophy is “buyer first” and invalid traffic means that the shopping experience of these traffic users will be very bad.

If you want to avoid invalid advertising on Amazon, you must refer to the above methods. These two types of advertising cannot bring sales to your store, but instead reduce the weight of your keywords. To determine whether the advertising traffic is effective, calculate it according to the above formula.

Recommended reading:

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How to return goods from Amazon in China? What documents do I need to prepare?