MY EXPERIENCE WITH ADVERTISING ON AMAZON

The new option for KDP Select authors to advertise their Kindle e-books with Amazon Marketing Services (AMS) is intriguing.

I have now run 14 different ads through AMS. I’ve also studied the results that several other authors have posted.

Today, I’m sharing some of my preliminary results and offering my thoughts on this critical question:

IS IT WORTH IT?

I’ll also mention a couple of alternative uses of this tool.

CONTENTS

1. Initial Return on Investment
2. Estimating Short-term ROI
3. Your Safe CPC Bid
4. Advertising Results
5. Possible Side Benefits
6. Long-term ROI
7. Countdown Deals and Freebies
8. Creative Uses of Book Advertisements

1. INITIAL RETURN ON INVESTMENT

The short-term return on investment (ROI) depends on these factors:

• your average cost-per-click (CPC) bid
• the royalty you earn for each sale
• your sales-per-click (SPC) conversion rate
• possible side benefits, like selling similar books, like selling print copies, or like getting more Kindle Unlimited downloads

You already know your royalty when you place your ad.

You can cap your average CPC by setting a modest bid.

But you won’t know your SPC conversion rate until you’ve invested money in an ad.

From running 14 different ads, I see firsthand that it’s reasonable to attain an SPC conversion rate of 4 to 10%.

A few other authors, including one who shared a screenshot, have shown that it’s possible to achieve an SPC of 10 to 20%. My feeling is that 20% will be quite rare.

On the other side, I’ve seen data for SPC’s of 1% or less.

Your SPC conversion rate depends on:

• how well your product page (cover, blurb, Look Inside, reviews) sells your book
• how well you target your advertisement to your specific audience
• how well what your ad conveys (visually in the tiny thumbnail, along with the first words of the title) matches what shoppers discover on your product page
• whether or not there is an audience for your book

The third point can have a huge impact. If customers glance at your tiny thumbnail and expect one thing, but find something different on your product page, this will kill your SPC.

The second point you can control through a wise choice of product targeting (not necessarily books). What matters most for your SPC is how well the target audiences of the selected products fit your book. But you must weigh this with how frequently you wish to make impressions: If the targeting is too precise, your ad might struggle to get impressions.

2. ESTIMATING SHORT-TERM ROI

There is a formula to calculate your short-term ROI:

(s.t ROI %) = (royalty) x (SPC %) / (ave. CPC)

EXAMPLE 1: Your book earns a royalty of $4.20. Your average CPC bid is 25 cents. Your SPC is 5%.

Your short-term ROI = $4.20 x 5% / $0.25 = 84%.

This example has a high royalty, a modest bid, and a decent SPC.

EXAMPLE 2: Your book earns a royalty of $2.10. Your average CPC bid is 25 cents. Your SPC is 5%.

Your short-term ROI = $2.10 x 5% / $0.25 = 42%.

If you earn a lower royalty, you either need to have a high SPC or bid lower to make up for it.

EXAMPLE 3: Your book earns a royalty of 34 cents. Your average CPC bid is 10 cents. Your SPC is 10%.

Your short-term ROI = $0.34 x 10% / $0.10 = 34%.

Here we have an excellent SPC and a lower bid, but that 34-cent royalty is the killer.

The lower your royalty or the lower your SPC, the lower you should bid.

3. YOUR SAFE CPC BID

Let’s spin this formula around and look at it from another angle:

(safe CPC bid) = (royalty) x (SPC %) / 100%

This tells you the maximum CPC bid you should place if you want your short-term ROI to break even. You need to have some prior experience to properly estimate your SPC %.

EXAMPLE 4: Your book earns a royalty of $2.10. Your SPC is 5%.

Your safe CPC bid = $2.10 x 5% / 100% = $0.105

In this example, a bid of 10 cents is safe (provided that your SPC turns out to be what you expect).

Not getting enough impressions? So what. With a safe CPC, you’re not losing anything (again, assuming your SPC is reliable; that’s a big IF, but you can monitor your ad and pause or terminate it at any time). This basically works out to free publicity, with possible long-term benefits.

4. ADVERTISING RESULTS

I’m not going to bore you with complete data from all 14 of my ads. I’ll share what I believe may be helpful.

My original ads had click-through-rates (ctr) of about 0.1% to 0.2%. After becoming more experienced with product targeting, my most recent ads have ctr’s of 0.4% to 0.9%. My last two ads are 0.85% and 0.90%.

The ctr doesn’t matter directly, since you pay for clicks, not impressions. Your impressions are free. However, better targeting will make your ad more cost-effective, so your ability to improve your ctr is one step toward getting the most out of your ad. It’s not uncommon for online advertising to yield a ctr of 0.1%. Most of my ads have done much better than 0.1%. That’s a plus for AMS, though of course it will vary by genre and by book. Not all books will achieve a ctr higher than 0.1%. But the potential is clearly there.

Several of my ads have a sales-to-clicks (SPC) ratio of 4%. My highest is 11%. I’ve heard from a few other authors who’ve done better (upwards of 20%); one shared a screenshot. I’ve also heard from authors who’ve done worse (1% or lower). SPC conversion rate is highly sensitive to targeting and packaging. Some books won’t get 1%. But 4% to 10% (or more) is attainable.

One reason my SPC may be under 10% is that my books tend to sell more often in print than in Kindle, and my print sales actually improved during the ad. Thus my short-term ROI may be better than it seems.

My recent average CPC bids have ranged from 25 to 35 cents. A week or more ago, these were around 50 cents. I’ve heard from other authors who also see their average CPC’s coming down. The value does depend strongly on genre or subject, as well as targeting. But in general, it seems to be coming down. This is expected, as there was a bidding frenzy in the early weeks, and it’s probably fizzled out to some extent. The bids may continue to come down, a nice reward for those who have exercised patience.

Remember, Amazon’s recommended CPC bid is 5 cents. I predict a day will come when that 5-cent bid can generate a decent impression rate, or at least a 10-cent bid.

Here are the numbers for a couple of my most recent ads (for educational books; one is in a pen name, yet the CPC and SPC are very similar):

• 21,365 impressions / 181 clicks / $0.28 average CPC bid / 7 sales / 0.85% ctr / 3.87% SPC
• 47,499 impressions / 174 clicks / $0.35 average CPC bid / 7 sales / 0.37% ctr / 4.02% SPC

One of these books sells for $5.99, so the short-term ROI is around 60%. The other sells for $2.99, so the short-term ROI is around 30%.

But maybe I just bid too high. If my average CPC bid had been 15 cents, my ROI’s would have been much higher (assuming I could achieve similar results with a lower bid).

However, I observed some strong side benefits during the ad campaigns, which I discuss next. My short-term ROI would actually exceed 100% if these factors are attributed to the ads.

5. POSSIBLE SIDE BENEFITS

Print Sales

One of my books, which ordinarily sells better in print than Kindle, saw paperback sales double during the month of February. This wasn’t just double January, but double months from 2014, too.

When I first started running KDP ad campaigns, I saw a bump in print sales of a few of the advertised books. Only one saw print sales double, but a few saw them improve.

I don’t think it will be typical of advertised books to sell more in print. This clearly favors books that ordinarily sell more often in print.

Similar Books

Another thing that I noticed was that for several advertised books, similar books saw an increase in sales.

In the best case, I saw sales of a closely related title double in February compared to previous months. This was the most extreme case, but I saw significant improvement in many titles where a similar book had been advertised.

If these two factors are due to the ads, then my short-term ROI’s on these ads actually exceed 100%. I need more data to be sure, but it’s encouraging.

Series

I don’t have a sequential series like many fiction authors have, but I have interacted with series authors who have seen sequential volumes sell much better after advertising the first in the series.

It helps to already have a measure of your progression ratios. For example, R2 = Vol. 2 sales / Vol. 1 sales, R3 = Vol. 3 sales / Vol. 2 sales, and so on.

Suppose R2 = 50%, R3 = 40%, and R4 = 25%. Then for every 100 copies of Volume 1 you sell, you should expect to sell 50 copies of Volume 2, 20 copies of Volume 3, and 5 copies of Volume 4. (For example, 100 x R2 x R3 x R4 tells you how many copies of Volume 4 you should sell, on average, for every 100 sales of Volume 1.)

If you have good measures of your R’s, you can actually calculate how much you can afford to lose advertising Volume 1 and still come out ahead overall. (If you’re thinking about making Volume 1 perma-free, there is a similar calculation that you’d like to apply.)

Kindle Unlimited

Another possible side benefit is that the ad might result in more Kindle Unlimited downloads. (Your book must be enrolled in KDP Select in order to be eligible for an AMS ad campaign.)

This helps your sales rank, and if they are read to 10%, they also show up as borrows.

6. LONG-TERM ROI

Even if your short-term ROI is a loss, your book advertisement may still be profitable.

It’s harder to predict and measure long-term benefits. If you can break even short-term, or at least only suffer a small percentage loss, then you have good prospects for reaping long-term rewards. If you suffer a large short-term loss, then you’re putting pressure on those long-term benefits just to break even.

However, there may be situations where you have other goals, like just getting readers as a new author, branding an image, going all out for a hot promotion, supplementing other marketing, etc. In those cases, it may be worth a short-term loss for possible long-term gain.

Possible long-term benefits include:

• creating brand recognition (this is how advertising really works: people tend to buy products they recognize; most people don’t run out to the store when they see an ad, but after enough repetition, months later they tend to favor a product they’ve heard of before)
• future sales from readers who want to read more of your work
• improved exposure through sales spurts, customers-also-bought list expansion, improved sales rank, etc.

If you’re taking a big short-term loss, this can get stressful. It’s hard to count on possible benefits. You hope to see actual sales.

It may be easier if you currently earn good monthly royalties. If you only invest a small percentage of your average monthly royalties on paid advertising, this lessens the impact of your advertising risk. When you’re a new author investing more than you’re initially making, the risk seems much more significant.

7. COUNTDOWN DEALS AND FREEBIES

An interesting possibility is running an AMS advertisement to help promote a Countdown Deal or KDP Select free promo.

Two downsides of the freebie are that you don’t earn any royalties during the promo and “sales” won’t show on your KDP ad report, so you won’t know if any of your “sales” came from the ad or not.

However, it’s not uncommon for authors to pay for advertising to help promote their freebies. For example, this is common with BookBub. So for those who already do this, running a KDP ad for a freebie is just another possible way to bring exposure to freebies. Obviously, your immediate ROI will be 0%. This is a big risk, but a possible way to bring exposure.

Freebies and Countdown Deals are sort of hit or miss. I tried a couple of Countdown Deals coupled with advertisements. I didn’t do any external promotion. (That’s not recommended; I was just testing this out.)

Two of my advertised Countdown Deals turned out to be duds; just slight improvements to sales when advertised at regular price. But one of my advertised Countdown Deals was extraordinary, bringing 20 times as many sales during this week compared to advertising at regular price. In this case, the added sales easily made up for the lower royalty of the promotional price.

Why did two show a slight increase and the other explode? Great question! I think it helps to get lucky; a few initial sales help to get the ball rolling. Once sales rank takes off, if it does, things can really get rolling with an advertised hot promotion.

But if the ball doesn’t get rolling, your promotion just sits there and fizzles out before it starts.

So my recommendation is to market your promotion externally, and just use AMS as one of multiple means of bringing exposure to your promotion. Use BookBub, E-reader News Today, Book Gorilla, or other means of externally bringing attention to your promotion, and consider combining AMS with this. (Or advertise externally and then at regular price, just after the ad finished, perhaps AMS can help you capitalize on some added sales at regular price.)

CREATIVE USES OF BOOK ADVERTISEMENTS

Measure Your Book’s Marketability

I recommend running an ad just to measure your SPC conversion rate. Divide your sales by your clicks. If this is about 1% or less, it suggests that your product page (or targeting) have substantial room for improvement. It could be the cover, blurb, Look Inside, or book idea, for example. If your SPC is 10% or higher, it shows that your book has great potential for sales, and should motivate you to work hard at your marketing, knowing that you have good prospects for selling books if you can just drive (relevant) traffic to your product page. When only 1 out of 100 customers who reach your product page buys your book, it’s a lot harder to be motivated to market.

Test the Market

I saw another author run two short-term ads with very specific targeting in order to gauge the popularity of similar, but different products. The author was deciding between two book ideas. This was a creative way to use these ads.

Chris McMullen

Copyright © 2015

Chris McMullen, Author of A Detailed Guide to Self-Publishing with Amazon and Other Online Booksellers

• Volume 1 on formatting and publishing
• Volume 2 on marketability and marketing
• 4-in-1 Boxed set includes both volumes and more