We definitely expected this and to industry insiders, this was nothing new. We have been forecasting Amazon advertising’s cost growth trend since 2018 when we started doing this research into Amazon trends for the coming year. There is nothing particularly surprising here, as we know that Amazon has been a pay-to-play platform for a very long time now. Back in 2014 when we first started you could literally just source some products from China, slap your label – or not even put your brand name on them -, and just let them organically get sales through the algorithm, trusting that people will do the rest. You could get some nice sales back then but fewer sales too because Amazon wasn’t as big as it is now.
Contrast that with where we are today and we can see that it is getting more expensive and it is getting more competitive, so it does make sense for the advertising to also be more expensive. You might be wondering how it is going to be more expensive and why? What are people saying regarding Amazon advertising getting more and more expensive?
Amazon Advertising Trends & CPC in 2022
To have a better understanding you need to see the Amazon Advertising Q4 2021 CPC Report by Pacvue. We can see that generally the CPC spending is going up. The CPC has been increasing by 14.3% year-over-year for sponsored products and 7.5% for sponsored brands. That’s really big. We definitely suggest you guys go and take a look at this report as it shows all the trends when it comes to the conversion rate, click-through rate, CPC, ROAS, the return on investment, and all this stuff that you, as an Amazon seller, must know to succeed.
Keep in mind that this is aggregated data by Pacvue so this is not absolute data from Amazon. This means that you should still read this report but take it with a little grain of salt because this data is coming from sellers that are using their software.
It doesn’t actually provide a whole vision of the entire Amazon ecosystem. We can assume that the sellers that are part of this report are already doing well or are big sellers, especially if they can afford PPC software. Nevertheless, if you’re already performing well on Amazon you better take a look and use the report as a benchmark to compare yourself.
The average click-through rate for Amazon SP (Sponsored Product ads) is between 0.30 to 0.35%. We can also see that the CPC keeps growing. Of course, it makes sense that from Q1 to Q4 it’s going to be more expensive because you have the holiday season with more competition and you also have more products. So the trend is Amazon advertising getting more and more expensive year after year. Also with bigger players getting into the marketplace (eg: Amazon FBA Aggregators), we have to consider that there will be a lot of large sellers that can afford to spend a lot of money to dominate their category.
More competitors result in higher bidding, which will drive up the cost per click. Aggregators and large sellers also have a large amount of money that they can spend so if you are a small seller, you’re probably going to have some difficulties competing with those aggregators.
Register your brand in Amazon’s Brand Registry to get all the benefits of as a brand on Amazon FBA.