How Much Does Amazon DSP Cost? Is it Worth It?
With global digital advertising spend predicted to grow by 8.2% up to a value of over US$700 billion by 2020, it’s no surprise that new digital advertising options are becoming available all the time.
Amazon’s latest advertising offering, Amazon DSP, or demand-side platform, set itself apart from the usual slew of sponsored ads by allowing users to programmatically buy a range of ads to reach audiences, both new and existing, on and off Amazon using the native data around people’s shopping behavior and interests.
In addition to its automated ad purchasing features, Amazon DSP includes a suite of metrics and analytics that allow advertisers to better understand, and therefore connect, with shoppers and base marketing strategies on performance data.
As great as all those features sound, the real question is: are the Amazon DSP costs worth it and what bang do you get for your buck?
How much does it actually cost?
So, what is the DSP? The first thing to understand about Amazon DSP is that it has a significantly different pricing model to that of the standard Amazon advertising packages. Rather than paying per click (PPC), as you would with a lot of traditional advertising, DSP uses a Cost Per Thousand displays model, where you pay per impression.
In addition, DSP has two options, a managed service, and a self-service option, both with different costs.
- Managed Service: This option offers access to the Amazon DSP advertising inventory, consultation services, or those who are just not experienced with using a programmatic advertising platform. The service requires a minimum spend of US$35,000, although this figure can vary. You can also work with an official Amazon Advertising Sales Partner, allowing you to choose between asking them to run it or running it yourself. In this instance commercials will range depending on the partner, but costs can be reduced to as a low as £5,000 a month. Working with an agency is also a possibility, this means negotiating a price with them which will vary depending on what else the partner does, e.g. listings, PPC, account management etc.
- Self-service: These customers are in full control of their ad spend and can take full advantage of the automation systems built into Amazon DSP to bid for ads as the price varies depending on format and placement. For self-service customers, a basic retargeting campaign will cost around US$3000. This represents an initial venture to see if DSP works for your business. From there forward, you have complete control over your spend on the platform. In the UK, Amazon will typically ask for a minimum spend of £100,000 per year, and significantly more in the US.
How much value you are able to extract from Amazon DSP largely depends on the size of your business. For most small businesses that are just starting out and are focused on amazon audiences, PPC and sponsored AMZ-platform ads are probably going to provide more value.
However, in most instances, larger businesses that are looking to increase their brand awareness both on and off Amazon, and who have the bigger budgets to soak up the admittedly expensive upfront costs, can really benefit from DSP.
That being said, even without choosing the managed service option, the combination of programmatically buying a range of ads for both on and off Amazon and the provided metrics are hugely valuable. DSP offers real-time bid filtering and post-impression detection and invalidation to avoid unnecessary costs and increase traffic quality. It also provides shopping insights and performance reporting for free.
However, the budget for DSP is high, so you can’t afford to run ineffective DSP campaigns — or you can be sure it won’t be worth the cost. So, how can you ensure your efforts on the DSP are worth it?
To be truly worth it, it must be effective… but how?
As with nearly every advertising strategy and platform, Amazon DSP is only truly worth it if you are optimizing your efforts. One of the primary factors in advertising strategy optimization is the correct targeting of advertising. No point in spending money on ads that are mostly seen by people who were never going to react to them in the first place!
Amazon DSP provides access to the huge amount of customer data that Amazon has access to in order to provide six targeting options:
- Behavioral Targeting: Targets customers who exhibit a certain behavior, such as browsing a specific product category within a set time period.
- Contextual Targeting: Targets potential customers browsing the web with relevant ads in real-time.
- Lifestyle Targeting: Targets customers who habitually buy from the same categories, such as men’s clothing, or fitness.
- Remarketing: Targets customers who have already interacted with your brand to re-engage with them.
- Audience Lookalike: Targets customers whose data shows similar buying patterns to your current customers.
- Advertiser Audiences: Uses brand data, such as email lists and CRM data to actively target existing advertiser audiences.
While appropriate targeting is hugely important, it is just as important that the ads targeted at customers are of the highest quality. Advertising content contributes to brand image and cheap blurry adverts portray no one’s products in the best light. In other words, you need to have a comprehensive working knowledge of the Amazon DSP ad specs so you can optimise each for the end points associated with the DSP. For example, if you’re creating an OTT video ad to appear on Amazon TV, the dimensions, colours, fonts etc. will all be different to banner ads that appear on mobile. This seems obvious, but it’s easy to get swept up in the confusion.
Even if you are targeting the correct audience and demographics with high-quality ad content, you need holistic visibility into performance both on and off Amazon to ensure that your advertising campaigns are having the right impact. While DSP does provide advertising data analysis for the Amazon site, it does not extend to its partner site, limiting not only how well you can understand the performance of your DSP ads but also who you are targeting. You need to consider which customers are the most optimal to target — that is, those who offer your brand the most value and themselves hold the highest customer lifetime value on Amazon…
To get the best performance out of DSP, and the best return on investment for your advertising spend, you need to partner DSP with a market-leading insight provider like Nozzle.
DSP performance metrics: what’s working?
In order to effectively measure the success of your efforts on DSP, it is prudent to measure different stages of the customer journey in isolation — as different ads will have different goals. For ease, let’s break this down into four stages of performance tracking…
Not only is the DSP useful for bringing awareness to new customers that haven’t previously engaged with your product(s), these campaigns often leverage the ‘retargeting’ feature of the DSP, allowing you to re-engage lapsed customers with awareness of new products, new value propositions and new branding. In this case, you’ll want to track…
- Click-through rates
- Branded searches
- Video completion rates
This hopes to track if the campaign’s retargeting efforts are succeeding in redirecting customers to product detail pages, reviews or wish lists. This stage hopes to give Sellers insight into what shoppers are doing before they buy, so brands can learn about their customers and influence decision making through the DSP. At this stage, it’s advisable to track…
- Detail page view interaction
- Cost-per detail page view
- Product review page views
- Add-to-list metrics — i.e. are customers saving your products for later after viewing a DSP ad?
- Add-to-cart metrics — same as above
This is essentially about tracking the conversion rate of your DSP campaigns.
Note: Amazon’s DSP analytics uses a 14-day attribution window to track conversions which can be quite limiting. Not all customers will make a purchase within that 14 day window, so if you only use Amazon-native data to track DSP conversions, you’ll only get half the picture. You need analytics capabilities that span much longer timelines… (but more on that in the next section).
Amazon’s ‘last-click attribution model’ on Amazon can be confusing. For example, a DSP ad could assist in conversion by driving a branded search, but the shopper would be captured by the search ad, attributing the credit to that ad and not the DSP one.
In short, there’s no golden list of conversion-metrics associated with the DSP, as there are so many other advertising efforts which nab the credit at the last minute thanks to the ‘last-click attribution model’ Amazon analytics abides to.
Amazon native programmes to track repeat purchases and customer loyalty are as follows:
- Amazon’s Subscribe & Save Program: (Which tracks enrollment and loyalty). However, this metric doesn’t track anything else as Amazon-native data is lacking holistic sales analysis.
- Audience Insights Report: This uses 13 months of retail sales data to give Sellers insight into the audiences they’re targeting. However, the focus on sales data and not individual customers can cause brands to misinterpret insights in front of them. A better strategy would be to collect holistic customer-focused data and build product-sales inferences from that.
Be effective on the DSP with Nozzle
Nozzle’s unique capabilities synergize expertly with the services offered by Amazon DSP, enhancing its customer ad targeting with unparalleled customer understanding. In addition to the huge well of customer data Amazon has access to, Nozzle offers a range of value-adding analytics, such as…
- Repeat purchase analysis: Identify customer lifetime value (CLV) to assess which products are performing best and, therefore, which products deserve more advertising attention and budget. Then, all you have to do is watch your advertising cost of sale (ACoS) break even!
- Customer retention identification: With Nozzle you can define and report on your retention rates, giving visibility into just how many customers come back to your brand and where you should focus your retargeting efforts.
- Trial conversions: Understand if your gateway products are performing to expectations. Highlight and identify the products that have the best cross-purchase rates.
- Sales analysis: When are your products performing best? Nozzle identifies, granularly, at what time of day, day of the week, and month your products are performing best so you can make the most out of them in your advertising efforts.
- Deal analysis: Split between new to brand, repeat and reactivated customers, understand whether running deals is a net positive for each of your products
What this means is that your targeting strategies are informed by the kind of genuine data-led insights that make sure your content is consistently shown to the customers with whom it will have the greatest impact.
Nozzle offers complete holistic visibility into performance both on and off Amazon, allowing advertisers to truly understand how their ads are performing both on Amazon and beyond. This ensures your budget is spent in the right places and your ad campaigns can be altered in real-time to provide maximum impact and ROI.
By partnering Amazon DSP with Nozzle, businesses have access to Paid and Display campaign management in one efficient centralized platform, leading to a more effective ad spend, maximized conversion, and increased sales. Nozzle's unparalleled knowledge of the Amazon ecosystem, including how to get the best of what DSP offers, makes us a game-changing eCommerce partner for businesses of all sizes.
See for yourself, schedule a call today!