The Ultimate Guide: Sponsored Products
7 min read
Sponsored Products ads are not only beneficial for businesses on the marketplace but they’re also crucial to sellers’ overall performance and consumers shopping online.
Whether you are a consumer who is fond of online shopping, which is an indispensable habit of our time, a brand that has just entered the market, or a seller who has gained years of experience in sales, as mentioned in our previous article on retail media ad types, Sponsored Products are a highly useful marketing tool for advertisers, marketplaces and consumers.
Sponsored Product Ads;
- become key revenue drivers, visible to many potential customers.
- promote individual product listings and improve product visibility.
- attract customers and reach new ones day by day.
- generate ads from product listings and offer automatic targeting which requires no experience.
- are cost-per-click (CPC), offering the option to bid per click and set your budget.
- -use sales and performance metrics to observe the effectiveness of your ads.
Creating a Sponsored Product ad campaign
- Determine your campaign information
- Set your bid and pick the products to advertise
- Decide on keywords and targeting
In addition to the many blessings it brings, the main benefits of Sponsored Products are the ability of marketplaces to turn their advertising space from their platform into a source of income. Marketplaces have become a great ad-serving point for brands that want to advertise their products in various places, sell more and increase their visibility.
Sponsored Products are displayed at the top of the search result page, middle, next to it, or further down the page, and on product detail pages.
Sponsored Products serving as a guide on your point of purchase
When a product you need comes to your mind in the middle of a busy day, you rush to the market. It is probable that you will most likely get lost in the mall, staring at various options of stores and unfortunately realize that you cannot get your work done in a short period of time. Does this situation sound familiar to you?
Back to the present, most of the consumers are experiencing the same problem with their online shopping, wanting to buy something but have dozens of pages filled with options and a very little time. At this point, when a consumer starts hunting for a product, Sponsored Product Ads appear at the most convenient places, becoming the greatest aide of consumers, a kind of guide. By means of saving time and making the right purchasing decisions, it becomes a major consideration for both product sellers and consumers while evaluating Sponsored Products and its efficiency.
The real question is do consumers actually find Sponsored Products appealing?
Absolutely, yes. In the survey conducted by Jungle Scout to 1,000 different consumers in 2022, it was revealed that the majority found Sponsored Products more appealing than other types of advertising. The percentage of consumers that viewed Sponsored Products ads in search results favorably is; 79%.
First Come First Serve Basis
There is actually a scientific fact behind the reason why consumers find Sponsored Product ads appealing. While searching for a product, we skim the result page with short rapid eye movements, going through visual processing. While skimming, our perceptions usually focus more on the items that are at the top and come first. When you buy a product on search pages, you are less likely to get that one product at the end of the last page. You can think of it as a first come first serve basis, Sponsored Products will be the ones to appear first in front of the consumer and since they will not be too obvious in organic listing, Sponsored Products’ chance of being purchased will increase because they are both reliable and engaging.
Organic or not: Listing Optimization
Perhaps the best thing about this type of ad is that it looks so natural in the regular organic results that it’s almost indistinguishable. That’s why it performs well with most of the shoppers. Although it says “Sponsored”, these ads easily blend with the organic listings. It is a big plus for advertisers to be able to present sponsored product ads to customers who are looking for a product without creating the feeling of being served an advertisement.
The big players revealing the potential power of Sponsored Ads
Worldwide values of Amazon
The use of Sponsored Products on Amazon is increasing significantly in many different countries and Cost per Click is showing +21% growth worldwide. Another thing to consider is the Advertising Cost of Sale (commonly abbreviated as ACoS) which is the metric that best describes whether or not an ad campaign is profitable. In 2021, the ACoS percentage reached 33.6%, showing +4% year-on-year growth worldwide.
Walmart Sponsored Products advertisers has doubled
Walmart is another name to remember in the retail sector, as it has the potential to be one of the world’s greatest retailers for many years. Walmart had a huge upswing with the Sponsored Products when many advertisers realized the benefits of advertising on the marketplaces and started experimenting with the new retail media platforms. With Walmart Sponsored Product advertisements, the platform offers sellers an outstanding ad opportunity to increase product/brand recognition and conversion. It is no surprise that in the first quarter of 2021, there were 125% more advertisers actively targeting Walmart Sponsored Products than there were in the second quarter of 2020.
Trends for US Amazon marketplace
-Amazon’s US market has been booming since the beginning of the pandemic and continues to grow with seller ad revenue growing by 23% in 2021 from Sponsored Products campaigns.
-Both Ad Spend and Ad Revenue saw an increase in the Sponsored Products category within a year.
-The rise in CTRs indicates that consumers’ interest and clicks on Sponsored Products have increased.
-The Cost Per Click has seen an annual increase of 21.6%. This means that running Sponsored Products ads has gotten more expensive for the average seller and vendor. However, there has been an increase in the Conversion Rate as well. It shows that the clicks have been converted to sales.
-The Average Order Value has seen a growth of 3.2%, helping sellers to generate more earnings.
-There is a significant increase in the median ACoS of 7.5%.
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About the latest advertising KPIs for the US Amazon Marketplace
In 2021, click-through rates for Sponsored Products advertisements increased by 2.9% overall. A variety of factors contribute to higher click-through rates, including ad placement, improved targeting, brand awareness, listing optimization, and a shift in user behavior.
Cost per click
A higher CPC is the signal of more competition, as there are more and more sellers in the marketplace, bid auctions for advertising places are also getting competitive. The cost per click rate grew steadily, exceeding $1.00 at the end of 2021 for Amazon Sponsored Products. Sellers need to keep their ad campaigns profitable with bidding optimization.
Conversion rate; turning more ad clicks into paying customers
The conversion rate is the percentage of visitors who complete a purchase after arriving at a product detail page through an ad click. Conversion rate improvement in 2021 might be considered a huge success for advertising. The conversion rates for Sponsored Products ads were consistently higher in 2021 than in 2020 with +6.9% growth.
Increased Conversion Rates include;
-Improved Ad Targeting
-Product Listing Optimization
-Advertising Cost of Sale
Most would now agree that Sponsored Products ads are not only beneficial for businesses on the marketplace but they’re also crucial to sellers’ overall performance and consumers shopping online. Businesses that aim to expand their e-commerce networks might consider using this form of advertising if they want to boost their company’s success and reach more customers over time. Sponsored items can aid organic performance by leading them to the top of the search results as well. This makes it easier to collect reviews, drive traffic, and, of course, sell more and more products.