Balancing Ad & Organic Sales on Amazon

Summary

The video script discusses a follow-up question from a newsletter on ad sales percentage and its implications for Amazon sellers. It clarifies the difference between business reports and ad data, highlighting the challenges of calculating ad sales on multi-variation listings. The speaker emphasizes the importance of ad sales percentage as a barometer for assessing ad campaign health and provides insights on optimizing ad spend based on sales dependency on ads. The summary also touches on the potential issue of cannibalization of organic sales by ads and the significance of organic ranking in product market fit.

Takeaways

• 📢 The speaker has a newsletter that is exclusive and not published elsewhere, with a link provided in the description to subscribe.
• 💌 The speaker appreciates follow-up responses to the newsletter, which allows for deeper discussions on topics like ad campaign analysis.
• 🔍 There's a distinction between data from business reports and ad data, which is important for understanding the nuances of ad performance and organic sales.
• 🧩 Calculating ad sale percentage on a child item level in multivariation listings can be misleading due to differences in sales attribution between ads and business reports.
• 🔑 Sessions and clicks data do not align perfectly because sessions are counted per shopper within a 24-hour window, while clicks are counted per ad interaction.
• 📈 Ad sale percentage is a critical metric, calculated by dividing total ad sales by total sales, to gauge reliance on ads for driving sales.
• 🚫 High ad sale percentages might indicate a product-market fit issue if not accompanied by strong organic rankings and visibility.
• 🤔 The speaker suggests rolling up ad sale percentages to the parent ASIN level to smooth out discrepancies and get a clearer picture of ad performance.
• 🛒 A high ad sale percentage can affect decisions on ad spend adjustments, as significant decreases in ad spend could impact total sales volume.
• 📊 The ad sale percentage provides context for optimizing total A Cost metrics, helping to strategize incremental adjustments to ad spend.
• 💡 The speaker discusses the potential for ad sales to cannibalize organic sales, suggesting that if organic visibility is high, testing a reduction in ad spend might be warranted.

Q & A

What is the purpose of calculating ad sale percentage in an Amazon ad campaign?

The ad sale percentage helps you understand how reliant your total sales are on ads. It’s calculated by dividing your ad sales by your total sales. This metric can be crucial in assessing whether your ad strategy is too aggressive, not aggressive enough, or balanced, and how this impacts the overall health of your campaigns.

Why might there be discrepancies between sessions reported in business reports and clicks in ad data?

Sessions and clicks may not line up because sessions are counted as a single shopper's activity within a 24-hour period, while clicks are counted every time a shopper clicks on an ad. This can result in multiple clicks being recorded for a single session, leading to discrepancies between the two metrics.

How can ad sale percentage be problematic when dealing with multi-variation listings?

Ad sale percentage can be misleading in multi-variation listings because sales and clicks might not align across variations. For instance, one variation might get all the ad clicks but no sales, leading to a high ad sale percentage, while another variation gets the actual sales. This can distort your understanding of which variation is truly driving sales.

What is the difference between how business reports and ad data attribute sales?

Business reports attribute sales to the specific product that was purchased, while ad data attributes sales to the last clicked ad, regardless of whether that exact product was purchased. This can lead to differences in how sales are reported between the two data sources, especially in multi-variation listings.

Why is it important to roll up ad data to the parent ASIN level in multi-variation listings?

Rolling up ad data to the parent ASIN level smooths out the discrepancies that can occur when analyzing individual child ASINs. It provides a more accurate picture of the overall performance of the listing, accounting for all variations rather than focusing on potentially misleading data from a single variation.

How can ad sale percentage inform decisions about ad spend optimization?

Ad sale percentage can guide decisions on whether to increase, decrease, or maintain ad spend. If a high percentage of sales comes from ads, reducing ad spend too quickly could significantly impact total sales. Conversely, if organic ranking is strong, there might be room to reduce ad spend without hurting sales.

What is meant by 'cannibalizing organic sales' in the context of Amazon ads?

Cannibalizing organic sales refers to a scenario where an ad is clicked even though the shopper would have made the purchase organically (without the ad). This can lead to ads being credited with sales that would have occurred anyway, inflating the ad's impact and potentially increasing costs unnecessarily.

What should you consider if you have a high ad sale percentage but low organic visibility?

If you have a high ad sale percentage and low organic visibility, it may indicate a product-market fit issue, meaning that your product struggles with organic ranking and relies heavily on ads for sales. In this case, focusing on improving organic ranking through SEO and other strategies might be necessary.

Why might lowering ad spend not always result in improved profitability?

Lowering ad spend might not improve profitability if a significant portion of your sales is driven by ads. Reducing ad spend without a strategic approach could lead to a sharp decline in total sales, negatively affecting overall profitability. It's essential to consider the ad sale percentage and how reliant your sales are on ads before making changes.

How can context help in interpreting ad sale percentage and making strategic decisions?

Context is key in interpreting ad sale percentage. For example, understanding your organic ranking and visibility alongside your ad sale percentage can help determine whether ads are truly necessary for driving sales or if they are merely supplementing organic sales. This broader understanding allows for more informed decisions about ad strategy and spend.