Most PPC reports stop at the ad sales line. The ads cost this much, they brought in this much, here’s the ACOS. But ads don’t only produce the sales you can see in the ad console.
The link between ads and organic rank
Amazon doesn’t publish how it ranks products in search. What sellers and agencies widely observe is that sales history for a search term matters: products that sell well for a keyword tend to rank better for it over time.
Ads are the most direct way to buy that sales history. When you advertise on a keyword and people buy, those sales can help your organic position for that keyword. Better organic position brings organic sales that cost nothing per click.
This is why launch campaigns often run above break-even: the ad sales themselves may lose money, while the rank they help build pays off later.
What this means for measuring ads
If ads can lift organic sales, then judging ads on ad profit alone understates what they do. Two things follow.
Cutting ads can cost more than it saves. A product that looks marginal on ad profit might be holding up its organic rank. Pull the ads and organic sales may slip with them. The ad report will show the saving. It won’t show the organic loss.
Some ads buy sales you’d get anyway. The opposite also happens. If a product already ranks first organically for a term, ads on that term may just move sales from the free listing to the paid one. The ad report shows healthy sales at a good ACOS. The account isn’t any better off.
Neither effect shows up in ACOS or ROAS. TACOS (ad spend as a share of total sales) gets closer, because it includes organic sales, but it still ignores margin.
Why we’re paid on total account profit
This is the reason behind our preferred pricing model. Under our account profit share, we’re paid a share of the growth in your total Amazon profit, from paid and organic sales together, above an agreed baseline.
That means:
- If our ads lift your organic sales, that shows up in the result, and in our fee.
- If we cut spend and organic sales fall, that shows up too, and it costs us.
- If ads are only buying sales you’d have made anyway, cutting them raises your profit and ours.
It’s the only model we’ve found where the agency has no reason to care which report a sale appears in. What matters is whether the account made more money.
How we measure it
We agree a profit baseline from your recent history, adjusted for season, before we start. Each month we report total account profit alongside ad profit, so you can see both. And we look for the organic effect product by product: which products gain organic sales when ad spend rises, and which don’t.
It’s not an exact science. Organic sales move for many reasons, from competitors to seasonality. That’s why we use a baseline agreed in advance, rather than trying to credit ourselves with every organic sale.
Want to see how your paid and organic sales fit together? Start with a free profit audit.