hey what's up guys in today's video i
want to talk about advertising on amazon
something that we should all be doing if
we have the ability to also if you're
not advertising this video is still
going to be relevant to you because it
pretty much applies to
advertising anywhere online generally
speaking i'm going to touch on some like
core competencies
because i know that you know a lot of
people when they start advertising or
maybe you're holding off on starting to
run ads because you're scared of it and
i get it i get it um but don't be scared
because it's a it's a necessary part of
the the process the game i always think
of it as a game it's part of the game uh
in this video though i want to really
share those like core competencies that
you need to understand so that you can
advertise effectively with a focus on
helping you understand if your ad
campaigns are profitable okay because i
know there are people that run ads and
can rack up you know thousand dollar you
know multiple thousand dollar bills
without even really knowing if what
they're doing is effective okay so what
i'm going to do is in this video show
you a specific column that i don't
believe amazon shows by default anymore
called a cost i think it's the most
valuable column for analyzing your ad
metrics at a glance and knowing if
you're profitable right away i'll
explain to you what that is and i will
explain to you basically how to
structure your ads if you're advertising
merch by amazon products because i know
a lot of us sell print on demand so i'm
going to use merch by amazon t-shirts as
an example and walk you through kind of
step by step by step um you know a
typical use case and if we're profitable
if we're losing money and even if we're
losing money
should we continue to run this ad
campaign because if you keep a long-term
uh time horizon it's actually okay to
advertise and operate at a loss because
you're continuously ranking your product
with each sale so why don't we get
started
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real quick reminder in the description
i've got a link to a free weekly print
on demand giveaway that you should take
advantage of it takes like 10 seconds to
enter and i've got a seven day merch by
amazon mini course one lesson delivered
a day to your email inbox if you would
like to take me up on that offer again
completely free and i've got a great
merch by amazon facebook group if you'd
like to join
all right so we're talking about amazon
advertising today by the way anybody
that is selling through merch by amazon
that wants to run ads but you don't know
how
it used to be that you couldn't even
advertise at all through merch then they
made the integration and ended up
shutting it down for a few years now
they are reopening it i mean it's been
reopened for a while
uh i think you need to be in tier 500 to
get access to ads however i've heard
some people getting access in tier 100
so if you're lucky
you may receive an email from them i
don't know if they'll email you but
you'll see it on the navigation when you
log in it'll say ads if you have access
so we are using merch by amazon standard
t-shirts as an example now
it doesn't actually matter if you're
selling through merch by amazon or fba
or kdp in this example uh all of the
like principles i'm gonna illustrate um
while they can be dynamic in nature what
we're really focusing on is on the left
side there we have the sale price okay
the revenue generated per sale which is
19.99
on the right hand side we have the
profit generated per sale which in this
case is 5.23
if if you want to you know if you're not
selling through merch and you're selling
through kdp and this video is still
going to be valuable for you just
remember it's sale price on one side
profit generated you know from that sale
price on the uh right hand side
okay
now let's go through a theoretical
example really quickly
so if we spend five dollars and 23 cents
on ads to generate a single sale okay we
just sold one of these awesome t-shirts
here behind me
and it cost us five dollars 23 cents an
ad spend we collect 19.99 which is what
amazon ad console sees
amazon ad console doesn't know though
that of that 1999 we are keeping 5.23 as
profit okay so if you say that we took
we collected 5.23 as profit but then we
have to deduct the ad spend which is
5.23 obviously we have zero dollars
profit okay i just wanted to make sure
we're all on the same page about how
this works and i wanted to remind you
that when you log into the ad console
they see the revenue they don't know
what the actual profit is so you're not
gonna have a column called profit
because they need to know your cost
basis
or in the case of amazon merch you know
your royalty structure now i'm gonna
show you a quick example i took a
screenshot of one of my um
well-performing
advertisements from advertising console
over the last seven days
and
now here's the thing we can talk for
like an hour about ads
i'm trying to do like a kind of like a
reasonable length youtube video here so
there's a lot of more nuance to what i'm
talking about than what i'm going to
necessarily share with you in this
example but bear with me okay what i
really want to show you is that
amazon's telling me
that i spent a dollar and 39 cents to
generate four orders
and while amazon doesn't know you know
our cost basis or our royalties they can
see at least that the total in sales was
79.96
okay so i'm selling the shirt at 19.99
um one quick tip by the way is like i
tend not to mix multiple shirts within
an ad group so this ad group we're
looking at and the data for it i know is
just one asin one shirt
okay and because the reason i say that
is because if you mix in other shirts
especially if they're priced differently
it's gonna really skew all your data so
i think with merch you wanna typically
do like one product per ad group
and that way you'll get clean data and
i'm gonna illustrate to you why that's
important right especially you know
if you're mixing prices that would be a
big big issue
so in this case i know it's one product
i know the price point is 19.99 so i can
say to myself okay i make five dollars
23 cents per order times four because i
see i made four orders oh look at that i
made 20 and 92 cents but that's a lot of
manual math that takes time to do and
most of us don't have time to do that
right especially for advertising a whole
bunch of products running different ad
types different match types in multiple
campaigns it can get a little tricky so
again another piece of manual math
though
is you could say all right 1.39 divided
by uh
20.92 cents which is our profit
that means about 6.6
of the profit we collected from those
four orders was spent on ads and the
other you know 93.4 percent we get to
keep as profit great but that's manual
math is there a better way ryan tell me
there's a better way yes
there is a better way it is called the
advertising cost of sales or acos or a
cost we just call it a cost for short
the formula for calculating a cost is
divide your ad spend
by the revenue generated from the sales
that that ad spend um led to okay so ad
spend divided by revenue
and how
do we get this number well fortunately
amazon will show it to us we just have
to go in and manually enable it it used
to just be there now i don't know why
but they hid it and i was like no it
went away but then i realized okay you
can still add it back
so you want to pause the video here do
this with me trust me if you don't have
a cost in your dashboard you need to get
it there so in your advertising
dashboard click columns then click
customize columns
then click advertising cost of sales and
then click the apply button then that
column will pop up when you get back to
your advertising dashboard and as you
can see here i have a 1.74
a costs now remember they do not know
what our profit
per sale
is so this 1.74
percent doesn't actually tell us
anything if we don't know
what our break even a cost is so we need
to know what our break even a cost is
and again
this will vary
based on what you're selling a product
for remember the first slide it was it
was the left-hand side it was the
revenue and the right-hand side was the
profit
okay we need to know both of those
things if we only deal in merch by
amazon standard t-shirts and they're all
priced at 19.99 well then this is very
easy but if you start getting into
standard t-shirts at various prices it
gets more complicated or other products
et cetera but let me at least show you
using the standard t-shirt example i'm
going to hide myself from the video
how to calculate our breakeven a costs
so we know that we make 5.23
per sale as profit
when we sell a t-shirt at 19.99 so i do
5.23 divided by 19.99
and what i get is
26.1 percent
as profit okay that means that our break
even a cost
is 26.1
percent
as long as we stay
equal to or less than that we are
profitable
okay so i hope i just did a good job
explaining this yes there's a ton of
nuance because you know again the big
variables are like what are you selling
you know what is your price point how
much profit do you have and also when
you create your ads on amazon guys like
you have the ability to mix in a bunch
of products into one ad group but if you
do that
it gets harder and harder to really
you know at a high level be able to look
at your data and know that you know okay
everything's good or everything's bad i
need to go tweak some stuff
so i do recommend like cleanliness when
you're setting up your ads this is why i
put together a whole course on how i run
ads and structure my campaigns my ad
groups etc um based on a number of
different things so i mean it's it's
pretty valuable and it's included in all
my like major courses or you can buy it
standalone if you're interested but
think long term guys
don't lose sight of the fact that even
if you have an a cost in this case what
if your a cost is 30
so you're losing money on ads but don't
forget
that every time you make a sale whether
it came from an ad or not
you are helping the amazon algorithm
better understand
how and what keywords to how to rank
your your shirt and what keywords to
associate with your shirt and you're
improving your organic rank
theoretically with each sale i mean it's
not like it's going to happen oh it got
another sale going to jump another you
know competitor it's not necessarily
that but
um you know obviously like the more
sales you have the better okay so even
if you're operating at a loss guys if
you're in a competitive niche
well that increase in organic rank over
time is going to lead to more organic
sales the ones that don't cost you
anything as far as ad spend goes
over time and what you will not see is
you will not see in anywhere in your
amazon ad dashboard anywhere
you won't be able to associate those
organic sales
with the ad spend that you had spent
previously okay so what i'm really
trying to say is it's okay to operate at
an a cost greater than your break even
if you're comfortable with it as long as
you're still advertising effectively
still generate generating sales
and uh you know you can actually go and
look at your competition on those
keywords and make sure you know if
you're not the organic rank one
theoretically you should continue to
improve your organic placement and make
more money in the future
now i wanted to tell you a funny story
really quickly um look at this
this one row right behind me here uh
this was
a time where i was lazy
in my advertising and
managed to rack up a
1096 percent a cost
this is not a good example of what to do
and this was from like four years ago
maybe
five at this point i don't even know
from a long time ago but that doesn't
matter i could still make this mistake
again today um the whole point is just
kind of laugh it off i did a youtube
video on this like way back in the day
when my channel was pretty new
and it was just funny it was like a
three minute video and i was like damn
like this is what happens when you don't
pay attention to your ad campaigns and
uh yeah so a one thousand percent a cost
is just burning money it's just lighting
it on fire and this is the threat of
running ads and i don't want to scare
you and say not knowing what you're
doing but at least at a minimum not
being proactive and staying on top of
your campaigns and uh trying to curb the
the wasted ad spend
speaking of that guys i can show you
like i said exactly how i do all of this
and show you how i took my merch account
from tier 10 to tier 200 000 i do have a
full merch by amazon course you can find
a link in the description guys thank you
so much for watching please like please
subscribe please let me know if you have
any questions or comments in the comment
section below and i will see you guys
tomorrow with a new video
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