Keyword Level Deep Dive to Improve Amazon Profitability

While running Amazon ads and the Amazon business in general, the north star business metric for me has always been TACOS which is the Total Advertising Cost of Sales. Not ROAS or ACOS

TACOS is basically all your ad spends as a percentage of revenue. The revenue includes both ads revenue and organic revenue. But more often than not, most Amazon teams focus only on ad revenue and ad spends, forgetting the most important part-organic revenue

Very few brands would even be measuring what their organic revenue is on the platform at a keyword level.

It is extremely important to take all steps that will increase organic visibility and organic sales in the platform. In fact, Amazon Pi Search Performance report gives you the SOV that you have at a keyword level for SP ads, SB ads as well as organic.

The lead indicator of profitability in the platform are mainly 2 things

• Increase in organic SOV in all generic keywords

• Increase in branded searches

Increase in branded searches is more often than not decided by what you do outside the platform. Executing good campaigns on ATL and really good clutter breaking Meta performance campaigns often does the trick here

But increasing organic SOV in generic keywords is often a result of what happens on the platform. In Amazon, whatever you do on ads also directly influences organic results. Eg. If you bid and rank top of Search on SP ads for certain keywords and your conversion rates are better than the category on those keywords, Amazon will also start ranking you on top organically for those keywords.

That is why I have often told that Amazon is a compounding channel and can be run profitably at scale because it rewards good performance with better organic visibility.

Because of this, if you could have organic sales and directionally estimate TACOS ( not ACOS) at a keyword level, you could make a lot of optimizations on your ads as well as overall content which would benefit the business.

Eg: Lets say “mixer grinder 750 watt” is a keyword that I am spending money on ads. I know the ad spends, ACOS and ad driven sales on this keyword. But not how many organic sales I am getting from that keyword and is that improving with time. And since I don’t know the organic sales, I also would not know TACOS for the keyword.

Ideally I would want both organic SOV as well as organic sales increase for this keyword. Without it, profitability would be very difficult.

Amazon doesn’t expose true organic-sales revenue at the keyword level, so any TACoS by keyword metric has to be derived.

Here is how I would do it directionally

You will need 2 reports

1. From ads platform: Sponsored-ads » Keyword or Search-term report: Will give Spend, clicks, ad-attributed sales for each keyword

2. From Seller Central: Brand Analytics » Search Query Performance (SQP): Will give Total impressions, clicks and purchases for your brand on each query Use same data range in both reports.

Both usually have the same attribution window for purchases

Once you have these reports, do this

1. Multiply your average selling price with the number of purchases shown in the search term query report

2. You already know the ad driven sales and ad spends from the ads dashboard search term report

3. Organic Sales= Total sales ( from 1)- ad driven sales ( from 2)

4. TACOS at a keyword level = Total Sales( from 1)/Total ad spends ( from 2)

Now you directionally know everything at a keyword level

How to use this data?

If you find certain keywords with lower TACOS than average, I would ideally create single keyword campaigns for those keywords. Use Top of Search placement and try and scale ads there. There is a very high chance that this will also improve organic rankings further and improve TACOS.

Similarly keywords with low TACOS mean a conversion problem on these keywords. Go and look back at the entire marketing mix ( product quality, proposition, price), content, reviews as well as operational metrics like TAT. Don’t scale up spends on those keywords.

There could also be cases where you spot keywords where ads are cannibalizing sales which would otherwise be organic ( good TACOS, but very low organic sales). In this case, there might be case of reducing ad spends on those keywords.

In addition to this, also track first page organic SOV for all high spending keywords and high volume generic keywords on Amazon Pi Search Performance report. If your ads are working and conversion rates are good, first page organic SOV should improve.

But as a caveat, also remember that, keyword level sales will always be lower than total sales. This does not include any of the browse led sales. So SQP report total orders will definitely be lower than your total actual orders.

Till now, the tracking often used to happen at a product level. Brands track organic GVs and ads driven GVs at a product level. But the next level of growth would come if you can do all of these at a keyword level because in most categories, Amazon is still massively search led and 70-75% of traffic starts their journey with a keyword on the search box.

If you track these rigorously and optimize the entire operations basis this, very high chances of getting to profitability sooner