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.

Outlines

00:00

📰 Newsletter Follow-Up: Understanding Ad Sales Percentage

The speaker discusses a follow-up question received in response to a newsletter, emphasizing the importance of the newsletter as a unique content source. They delve into the complexities of calculating ad sales percentage on a child item level, especially in multivariation listings, and highlight the potential issues that can arise from discrepancies between business reports and ad data. The speaker clarifies the difference between sessions and clicks in the context of Amazon's ad model and the challenges in assessing the impact of ads on organic sales. The goal is to provide a broader understanding of how ad sale percentage can be used as a metric to evaluate the health and aggressiveness of ad campaigns.

05:02

🔍 Deep Dive into Ad Sales Attribution and Multivariation Listings

This paragraph explores the nuances of ad sales attribution, particularly in the context of multivariation listings. The speaker explains how sales can be attributed to different variations of a product in ads versus the actual sales recorded in business reports, which can lead to skewed ad sale percentages. They discuss the 'last click' model of sales attribution and its implications for assessing the performance of different product variations in ads. The speaker suggests rolling up the data to the parent ASIN level to get a more accurate picture of ad performance and to avoid the pitfalls of analyzing at the child ASIN level. The paragraph also touches on the strategic use of ad sale percentage in identifying which product variations perform best in ads.

10:04

📉 Utilizing Ad Sale Percentage for Strategic Ad Spend Management

The final paragraph focuses on the practical application of ad sale percentage as a tool for managing ad spend and sales strategy. The speaker illustrates how a high ad sale percentage can indicate a heavy reliance on ads for driving sales, which is crucial for understanding the impact of any changes to ad spend on overall sales volume. They provide an example of a brand that needed to lower its ad spend and total A Cos but had to do so strategically due to the high percentage of sales driven by ads. The paragraph concludes with a discussion on the potential for ad cannibalization of organic sales and the importance of organic ranking and visibility in the context of ad performance and profitability.

Keywords

💡Ad Sale Percentage

Ad Sale Percentage refers to the proportion of total sales that are attributed to paid advertisements. In the video, this concept is central to understanding how reliant a business is on ads to drive sales. The speaker explains that a high ad sale percentage may indicate that a significant portion of sales is dependent on ads, which could be problematic if ad spending needs to be reduced for profitability.

💡Multivariation Listing

A Multivariation Listing is an Amazon product listing that includes multiple variations of a product, such as different colors or sizes. The video highlights the complexities of calculating ad sale percentages at the child item level within such listings, where discrepancies can arise between ad sales and total sales attributions, potentially leading to misleading data.

💡Sessions

Sessions refer to the number of individual shoppers who visit a product listing on Amazon within a 24-hour period. In the video, sessions are contrasted with clicks in ad data, where a session counts as one visit per shopper, while clicks can be multiple per session. This distinction is important for understanding discrepancies between business reports and ad performance data.

💡Clicks

Clicks are the number of times shoppers click on an ad, leading them to a product listing. Unlike sessions, which count unique visitors, clicks can occur multiple times from the same shopper. The video discusses how this can create differences in data when analyzing ad performance, as clicks might not always correspond directly with sessions.

💡Business Reports

Business Reports on Amazon provide detailed data on sales, sessions, and other metrics. In the video, the speaker contrasts data from business reports with ad data, explaining that business reports count sessions differently from ad clicks, leading to potential discrepancies when assessing the effectiveness of ad campaigns.

💡Sales Attribution

Sales Attribution refers to how sales are credited to different marketing activities, such as ads. The video explains the concept of last-click attribution, where the last ad clicked by a shopper before making a purchase gets credited for the sale. This method can cause discrepancies, especially in multivariation listings, where the sale might be attributed to a different product variation than the one most engaged with through ads.

💡Total ACoS

Total Advertising Cost of Sales (Total ACoS) is a metric that represents the percentage of total sales spent on advertising. In the video, Total ACoS is discussed in the context of overall profitability and ad spend optimization. The speaker advises using the ad sale percentage to contextualize and strategically adjust ad spend to manage Total ACoS effectively.

💡Organic Sales

Organic Sales are sales that occur without the influence of paid advertisements, typically through organic search results or direct traffic. The video discusses the relationship between organic sales and ad sales, noting concerns about ad sales potentially 'cannibalizing' organic sales, where customers might click on ads even when they would have purchased the product organically.

💡Traffic Source Performance

Traffic Source Performance refers to analyzing where traffic to a product listing is coming from, whether organic, direct, or through ads. The video mentions this concept in the context of determining if a business is being too aggressive or not aggressive enough with its ad spend, using ad sale percentage as a tool to assess the impact of ads on overall traffic and sales performance.

💡Cannibalization

Cannibalization in the context of advertising refers to the situation where paid ads may be taking sales away from organic sources, rather than adding new sales. The video addresses this concern by discussing how a high ad sale percentage could indicate that ads are potentially cannibalizing organic sales, especially if the product already has strong organic rankings.

Highlights

The newsletter content is exclusive and not published elsewhere.

Ad sale percentage can provide crucial context when assessing the health of ad campaigns.

Business reports and ad data differences can impact the accuracy of traffic source analysis.

Understanding sessions and clicks: Sessions are unique shoppers within a 24-hour window, while clicks represent every time an ad is clicked.

The last-click model in ads can lead to discrepancies between sessions and clicks, affecting sales attribution.

Calculating ad sale percentage on a child item level in multi-variation listings can be problematic.

Rolling up ad sale data to the parent ASIN level can smooth out discrepancies and provide more accurate insights.

Ad sale percentage helps identify how reliant a product is on ads to drive sales.

Ad sale percentage is calculated by dividing total ad sales by total sales.

A high ad sale percentage could indicate a heavy reliance on ads, which may be an issue for profitability.

Contextualizing ad sale percentage with total ACoS can guide strategic decisions in ad spend reduction.

High ad sale percentage with high organic ranking may suggest potential cannibalization of organic sales.

A combination of high ad sale percentage and poor organic ranking could indicate a product-market fit issue.

The orange color variation in ads performed well, but the black variation had the highest sales in business reports.

Strategic optimization of ad spend is crucial when a brand is highly dependent on ads for sales.

Transcripts

a video to this a follow-up question

that I got in response to a newsletter

that was sent out this uh today Tuesday

uh so if you're unaware by the way we

have a newsletter that goes out I don't

publish this content anywhere else if

you want to get on that list feel free

to use the link down in the description

um but I got this question by the way I

love getting a follow-up responses to

our newsletter it allows me to add

contacts now in all honesty I could have

just created a very short uh email

response to this one however

um I did want to give some context on

different data points between the

business reports as well as the ad data

why calculating uh your organic or your

ad sale percentage on a child item level

if it's a multivariation listing could

be problematic as well as some broader

context as to how we use ad sale

percentage as sort of a barometer when

it comes to assessing the health of your

ad campaigns being if you're being too

aggressive or not aggressive enough

because there's three numbers that we

use sort of as barometers to really

gauge the impact of the ads on the

organic as well as just the total sales

performance okay

so first up I'm going to give some

context on the data differences so

essentially this question I uh one of

the three points in this newsletter was

like analyzing traffic Source

performance and like determining if you

are maybe being too not aggressive

enough in your ads or if you're being

too aggressive with your ads uh ad sell

percentage can definitely add contacts

to that and again I'm going to get that

to that in the end when I talk about

um how we use ad sale percentage in

context because context is key here

um but the question was uh some of the

wording was kind of insinuated that we

had figured out a way to assess

um the actual traffic sources

um meaning not only how much sales is

coming from

um organic versus total sales

but

um how much like the actual traffic is

coming to so I did want to get into the

differences in the data sources being

the business reports and then the

um your ad data and that's going to kind

of flow into the next point on why

calculating ad sale percentage on an

individual child Asin and multivariation

listings is going to kind of be

problematic so when understanding

sessions and understanding clicks please

know that these two numbers are not

going to line up specifically oftentimes

people will go into their account and

they will um sort of like assess or

assess you know the number of clicks

they're getting and they'll look at the

sessions they're like this isn't

possible given the total sales volume

and all of these kind of things

um and then they would be correct

because sessions

are calculated inside of the business

reports as an individual Shopper within

a 24-hour window meaning if one specific

Shopper will navigate to the listing and

visit your page more than once in a

24-hour period that will only be counted

as a single session where in um your

Amazon ads or you're like in a cost per

click model you're charged for every

time a shopper clicks on an ad and it's

possible for a shopper to click on more

than one ad just depending on how things

are going as far as the sales

attribution

um or the ads are calculated it's like a

last click model being like the last ad

that got the click is going to be the

one that's attributing the sale to it

however it could potentially be the same

job we're clicking around a couple times

and that is entirely possible

um and so for that reason your sessions

meaning the traffic

um that is coming to your listing again

one single person within a 24 hour

period is counted as a session and your

clicks are not going to line up that's

just kind of the name of the game

there's not really a really good way to

assess this I'm currently trying to dig

into some data points to see if it's

even possible to assess but really

there's no real honest way to assess it

um that is going to be a hundred percent

accurate okay

now this flows into our second thing on

how calculating ad sale percentage so if

you're not aware ad sale I call AD sale

percentage some people call like the

ratio of ads to organic it's essentially

taking your total sales subtracting your

ad sales and then saying or not

subtracting uh taking your total ad

sales dividing it by your total sales

and that brings you a percentage

what percentage of my total sales are

coming from my ads right and this could

be very helpful because if you're highly

dependent on ad sales to drive you know

total sales for a product that could be

an issue now

um how that calculation Works comes down

to the sales attribution differences for

the ads versus your organic or your

total sales so in your ads whatever

product received the click sponsor

products it could be

um the same product within like say a

listing and sponsored Brands

um it says any products that are

contained with on are sold underneath

that brand name I have a whole video on

um kind of like what's the true a cost

of your sponsor brand ads which by the

way if you have

um licensed products that's going to be

a really really important video for you

to watch but I digress and so

um we get kind of you can see how this

potentially has discrepancies so if a

sale is attributed to say one variation

because it's in the ads and then when

it's in the business reports a business

report is not going to report a sale

that didn't actually happen on a

specific product so in that case what

you can end up doing is have one product

that's getting all the ad sale

attributions and then the other product

is getting all of the uh total sale

attributions the business reports is the

ones that's actually been purchased and

where that can kind of create issues in

multi-variation listings is say one of

them is getting all of the ad sale

attribution but zero of the total sales

volume you're going to see a hundred

percent add sale percentage on there so

it's like oh my gosh 100 of my sales are

coming from ads well essentially there's

like no sales whatsoever so that could

be kind of confusing

um and then in other ways you would say

like oh there's no ad sales on this

product meaning this is not the one

that's getting the click in the ads but

but it's getting all of the sales inside

of the business reports because that's

the one that people are actually

purchasing and so if you're doing it on

this granular level when it comes again

this is only multi-variation listings if

you have a single product listing it's

not going to matter

um so what we will do to kind of

mitigate this is we roll it up to the

parent Nations we essentially look at

all of the spend and all of the uh sales

that are for a parent Asin and then we

kind of can navigate it that way and

that Smooths out the lumps pretty much

you can get some you know really good

numbers now this is not really I know

there's some people who say like oh why

would I not

um you know like the attribution models

are kind of weird I really don't have a

problem with it

because what I've seen uh in the past is

even if we have a bestseller so uh the

example I use all the time is that we

had a multi-variation listing with a

whole bunch of colors that we were

advertising the orange one is the one

that performed phenomenally in the ads

it got the most clicks it got the most

engagement

um we're actually getting lower cost per

clicks because the engagement was so

high but then essentially everyone

bought the black one and if you looked

in the business reports it seems like

the black one was the best performing

variation when we swapped in the ads for

the black one to be the advertised

product it didn't perform as well so you

will end up with times where

um one of the like other color

variations sort of acts like a funnel

and in those cases it makes complete

sense for Amazon to report the sales

that way because it helps you identify

what actually performs best in ads when

it comes to like an ad analysis uh sort

of thing you want to make sure that like

you're actually looking at what's

performing best and so it makes total

sense it's just something that you

should be aware of when it comes to

optimizing

um and calculating this ad sale

attribution okay so that's my little

Spiel on that now the very last thing I

want to talk about is how you can

actually use

um this ad sale percentage number and

what it tells us in context so as I said

before ad sale percentage is simply your

ad sales divided by your total sales

again you can do this on an account

level you can do this on a parent Asian

level you can do this on a child

variation level if you want I would

still recommend doing it on a parent

level in an account like overall account

level

um

and so what this tells you is this tells

you how Reliant you are on ads to drive

sales and this can be highly important

to contextualize things like your a

cause as well as especially your total a

cost metrics so we've had accounts

before where

um we might be like I was Consulting on

some Brands where they were really

looking to optimize

um their total a cosmetrics they really

needed to bring this number down and

while looking at the a cost and the

total a cost in isolation and then

simply looking at the total sales volume

and identifying like we need to bring

this number down in essence all you can

really do from an ads perspective if

you're looking to lower total a cost

numbers is going to be lowering your ad

spent however using the ad sale

percentage gives you context as to how

quickly or how incrementally and slowly

you should be lowering your ad spend so

in this particular case the brain brand

was very adamant that they needed to

lower the ad spend but when looking at

the ad sale percentage 75 to 80 percent

of their total sales were driven through

ads in this case if we significantly

decrease the ad spend more likely than

not we're going to have a significant

decrease on the total sales volume as

well now oftentimes for profitability we

really still have to bring the total a

cost down so I get it it's not that we

have to just say oh well that's the way

it is and there's nothing we can do

about it you definitely need to start

optimizing but again given the context

of the ad sale percentage it's pretty

obvious that we needed to be very very

strategic with where how and when we

were going to start bringing down the

um total ad spend volume now

there is some debate as to whether like

a very high odd sale percentage is going

to mean that you are as it's called

cannibalizing your organic sales meaning

um someone sees you organic and then

sees your ad and then clicks the ad and

then the ad is attributed to the sale

where if you didn't have the ad on the

page they still would have purchased

there's not a really cut and dry answer

to this the one other piece of context

that you can look at is if I have a high

ad sale percentage meaning a lot of my

sales are attributed to my ads and I

have a high total a cost number do I

have good organic ranking so I have very

high organic ranking and very high

organic visibility then it might be

worth testing bringing down my ad spend

maybe again you still want to be

strategic here but it could be that

there's cannibalization happening

however if you have a high total a cost

number and you have a high add steel

percentage number and you don't have a

good organic ranking or good organic or

visibility then it's most likely a

product Market fit issue meaning you're

struggling with rankings and that's why

those numbers add sale percentage total

a costs and consequently profitability

aren't very good so

um again really really think uh this

commenter for following up with this

question I hope this has given you a lot

of context and as always if you want to

be getting these uh exclusive

newsletters and potentially having

follow-up questions of your own uh feel

free to check the description for the

link to sign up for the newsletter