By Nick Stephenson (Part Five of… Well, several).
“Scaling up means constantly seeking and implementing better ways of thinking and acting across old and new corners of the system. ”
We’ve talked about coming up with a great “idea” and how to turn that into a final manuscript ready to rock, and we talked about how to get your book out into the world and start making sales (and building an email list).
It’s no secret that building a successful author business (or any online business) requires an understanding of – and budget for – paid advertising.
For authors in particular, this means getting to grips with Amazon Ads, Facebook Ads, and Bookbub Ads (there are other options, but those are the main three).
The problem is, paid ads won’t “fix” problems with your sales. All they can do is scale up what’s already happening.
So, as we explored in the previous sessions, if you haven’t optimised your click-through rate (eg – getting the right cover, getting reviews) and your conversion rate (cover, description, reviews, pricing, look inside), then ads won’t help. In fact, they’ll probably eat through your budget and give you very little to show for it.
This all means you shouldn’t be tempted to “skip ahead” to the advertising without making 100% sure that everything else is as optimised as possible FIRST.
To give you an idea of what this means in practice, here’s how I used data from 20M Amazon Ads impressions to more than quadruple my results (without changing the book itself):
^^ note: since this video was shot, Kindle ebooks no longer attract VAT in the UK.
Knowing when “the time is right” to start investing heavily in advertising is tricky. But thankfully, we can use a few metrics to test whether paid ads might be a good fit.
There are a few numbers to wrap your head around – but don’t worry, it’s nothing too complicated…
Ultimately, advertising is going to bring you a profit if it costs you less to advertise than you earn from sales (duh).
Which means if your “cost per click” is lower than your “earnings per click” then you’re all set (also, duh).
But how do we figure those things out?
If you’ve written a “good book” with an appropriate cover, compelling product description, you’ve got some good reviews, and you’re priced around $3.99, then you should see something in the region of:
These above “baseline numbers” mean that you need 10 clicks to make a sale, costing you $5.00.
Now, with a $4.99 ebook, you’re only earning 70% of the list price – so your earnings per sale are $3.50.
Headline: you’re losing $1.50 on your headline costs (a 30% loss).
And this is pretty standard. It’s very unusual to consistently earn a profit on your first sale at any kind of reasonable scale (eg – you might get the occasional “fluke” but it’s almost impossible to scale that up).
Yes, chances are – even if you’ve got EVERYTHING right – you’re going to lose money on the sale of that first book.
The good news is, we have something called “read-through rate” to make up for it. Or, in other words, the number of SUBSEQUENT books that a reader will buy from you later.
In the example above, if it costs us $5.00 to make a sale, and we earn $3.50 per sale, we need 1.42 sales to break even.
Meaning, 42% of those who buy book 1 need to buy at least one other book from us for the ads to break even.
Any subsequent sales after that will be 100% profit.
This is why it’s so important to optimise your books – money spent on the right cover design, editing, formatting, layout and descriptions will pay dividends in the long run, as any improvement to click-through rate, conversion rate, or read-through rate will make a huge difference.
It’s also why writing in a commercial genre and writing in a series makes life so much easier (the read-through rate is stronger vs standalones).
Here’s a more indepth explanation – with Adwerks founder Michael Beverly – about just how many book you’ll likely need before investing heavily in advertising makes sense:
^^ if you’re intersted in Michael’s team running your Amazon Ads for you, fill out the form right here.
The short version is – if you only have 1 or 2 books, or if you don’t write in a series (or at least in the same genre) then it’s going to be a lot more difficult to move the needle with paid ads.
That’s not to say you CAN’T make it work, but it’s a lot more difficult.
So, before you jump in head first, it’s a good idea to get an idea of your numbers. What’s your click-through rate? What’s your conversion rate? What’s your read-through rate?
The best way to get these numbers is to, well, run some ads.
Amazon Ads, in particular, are an easy way to get a handle on your metrics. They’re fairly simple to set up, you don’t need a huge budget, and your ads dashboard can give you a good idea of your stats (the numbers aren’t perfect, but they’ll give you a good idea).
Click-through rate: you want this to be around 0.1% for Amazon Ads (yes, a tiny percentage, I know). Anything much under this suggests your cover needs work. Often, your click-through rate is also a good indicator of how well Amazon thinks your clicks will convert into sales and / or page reads – and can also influence how much your pay for those clicks.
Cost Per Click: with Amazon, you’re only paying for the click. The upside of this is you’re not wasting money on people NOT clicking through to your page. The downside is, if your ad isn’t bidding high enough, or your click-through rate is too low, it might not get any impressions. The cost-per-click figure is listed out for you in your ads dashboard – so you can use this to figure out how much each sale of your book is costing you.
Conversion rate: Amazon will give you the total number of sales that can be attributed to each click, but it only counts sales of the book you’re advertising (so no page reads, paperback sales, audio sales, etc) and the metrics are often delayed – sometimes up to a week. So, it’s not perfect, but you can take your total sales and your total clicks and work out your conversion rate pretty easily. If you’re getting a conversion rate much below 10% (for a $2.99 – $4.99 book) or 15-20% for a 99c book, then chances are your product description or reviews need work.
Cost per sale: easy to work out – take the total spent on each ad and divide by the total unit sales.
Earnings per sale: a little more tricky, as Amazon doesn’t include page reads (for Kindle Unlimited), paperback sales, audio sales, or any read-through sales. So the best thing to do is make a note of your sales and royalties for your advertised book before you start running ads, then again after a few weeks. The difference in the figures can then be cross-referenced with the reported figures and you can get a pretty good idea.
Read-through rate: again, give it a little time, but then take total unit sales of your advertised book and then see how many other books were sold during the same time period. This will give you your read-through rate. For example, in any given sales period:
This suggests a read-through rate of around 2.00. Meaning, for every sale of book 1 we can expect, on average, one other sale. For a total “earnings per reader” of $7 ($3.50 x 2.00).
So our advertising costs of $5.00 from earlier will give us a profit of $2.00 (40% ROI).
Ads can still work. It all comes down to YOUR numbers.
You might have a HUGE conversion rate. Or your read-through rate on 2 books might be 80%. Or, you might have the same metrics but your prices are higher. Or your cost-per-click might be half as much.
There is no way of predicting EXACTLY what to expect until you start running ads for yourself. And, of course, the 3 major platforms (Amazon, Facebook, Bookbub) all have different quirks, pros, and cons.
What looks amazing for an Amazon ad might look awful for a Facebook ad, for example. And vice versa.
So, in the next section, we’re going to take a look at “the big three” platforms and see how we can make them work for YOU.
Click the button below to move on!