How Does AdLabs Calculate Placement Adjustments?

Our Philosophy & Methodology for Placements:

The Purpose of Placement Adjustments:

• Placement adjustments are critical for optimizing ad spend and maximizing total sales volume within your target ACOS

• Whether with Sponsored Products or Sponsored Brands, the goal is to align your Cost Per Click (CPC) with your Revenue Per Click (RPC) at both the keyword and campaign placement level

• Your keyword bids and campaign placement settings together create one CPC. It's therefore crucial to ensure that campaign placement settings and individual keyword bids are working together to hit your sales and ACOS goals

Sponsored Product Placement Calculations:

1. First, we calculate the RPC for each individual placement

2. Then we identify the worst performing placement (that is, the placement with the lowest RPC). We set the bid adjustment for this placement to 0%.

   

   Note: Since Amazon doesn't allow us to apply negative adjustments to placements, AdLabs creates a workaround by decreasing all the keyword bids in a campaign to account for the under-performance of the lowest performing placement.

3. The other two placements with stronger performance receive an increase based on their RPC relative to the worst performing placement's RPC.

This strategy allows us to hit the right CPC for each placement

Example:

• Top of Search RPC: $2.00

• Rest of Search RPC: $1.50

• Product Pages RPC: $1.00

In this scenario, since Product Pages has the lowest RPC, we set this placement to 0%.

We then calculate the Rest of Search and Top of Search increases proportionally based on how much higher the RPC is compared to the lowest RPC.

Here is the formula:

Placement Bid Adjustment = (Placement RPC / Worst Placement RPC) - 1

Here’s how those calculations would follow for this example:

This would result in a +50% bid adjustment for Rest of Search and +100% for Top of Search.

Sponsored Brand Placement Calculations:

Things are a little different with Sponsored Brands in that Amazon doesn't allow us to adjust bids for Top of Search. Instead, they allow us to increase or decrease for placements non-Top of Search.

For this reason, the Top of Search is by default the "base bid" and we can increase or decrease for other placements:

1. Calculate the RPC for Top of Search and non-Top of Search

2. Calculate the non-Top of Search placement adjustment based on it's relative performance to Top of Search RPC.

Example:

• Top of Search RPC: $2.00

• Non-Top of Search RPC: $1.00

Because we can decrease for Sponsored Brand placements, no workaround is needed here in our formula:

Sponsored Brands Non-Top of Search Adjustment = (Non-ToS RPC / ToS RPC) - 1

This example would result in a -50% bid adjustment for non-ToS placements.

A Solution for Low-Data Campaign Scenarios

If a specific campaign placement has low data (e.g., 1 click and 1 order), we will then reference the placement performance for that campaign's Optimization Group in order to get more reliable data.

If the Optimization Group itself doesn't have enough data, we will reference the overall placement performance for the entire advertising profile.

To learn more about The AdLabs Data Confidence Hierarchy, please see this article:

For each campaign placement adjustment on the Preview Optimizations screen, you will see a badge in the "Reason" column for whether that placement calculation came from the campaign itself, it's group, or the profile:

To learn more about the badges in the Reason column check out our article here: