This is a win-win for Amazon as they then get paid more money regardless, from people buying the books (depending on the book Amazon is typically taking 30 to 70% of the profit from book sales), and they get paid for the advertising itself.
The Click Thru Rate varies on the product and the advertising campaign.
Click Thru Rates
- Poor, 0.3% or lower.
- Average, 0.4%.
- Good, 0.5% or higher.
It is even possible for targeted advertising campaigns to get a CTR of 2 to 3% (or higher), but this is comparatively rare and requires some experimentation on the part of the user.
The Conversion Rate for sales is typically between 9 and 9.5%. Thus 100 clicks typically leads to roughly 9.25 sales. Again, this can vary on the item being sold.
If you were paying perhaps $50 per 1000 views (also known as CPM Advertising), and attaining a good click thru rate of 0.5% that equates to only 50 people clicking on your advertising. Ergo, you are paying $1 per click.
Now $1 per click may not sound too great or too bad, depending on what you are selling. What is bad is the conversion rate of 9%.
Thus you are spending $11 to just to get 1 sale. If you are making at least $12 of profit off each sale then it is fine to be doing that, but for book sales you are probably not making that much.
Eg. The maximum sale price of an ebook is normally $9.99 and you get 70% of that. If you set the price to $10 or higher then Amazon takes 70% and you only get 30%.
Thus in that scenario you could be spending $11 just to make $7.
Fortunately there is a hitch to this whole idea.
Amazon doesn't actually do CPM advertising...
No, they only use PPC (Pay Per Click) Advertising.
And the "Suggested Bid" according to Amazon is between $0.61 and $1.80 USD.
So that does create a bit more flexibility, but the upper number of $1.80 suggests that there is a lot of bidding going on.
You could potentially bid 65 cents per click, paying $650 to get 1000 clicks. In theory, assuming someone else doesn't outbid you for the keywords you are advertising to.
If 9% are converted into sales, you are looking at 90 sales. So you are paying $7.22 per sale.
For $9.99 ebooks making a $7 per sale, good luck with that conversion rate. You would be literally losing 22 cents per sale on the amount of advertising required to get 1 sale.
If you bid lower, say $0.61 per click the math works a bit easier. You are now spending $6.77 to get 1 sale worth $7. Finally you are making money, but again you are still taking a financial risk and gamble that you will even get sales.
Which begs the Question: Why do Click Thru Rates Matter?
If a click thru rate and a conversion rate of a particular product is too low Amazon will reject it for being too low quality and will run different advertising instead which converts more sales, which leads to Amazon making more money.
A good click thru rate and a good conversion rate means more money for both you and Amazon. A bad one means Amazon's algorithms may decide to ignore your bids because you are either:
A) Not bidding enough to make it worth their while.
B) Not selling enough to make it worth their while.
The Rigged System
Amazon's PPC system is for suckers. It is for people who don't know how to advertise their books any other way and are willing to throw money at the problem.
Amazon's advertising system is really geared towards brand name publishers and authors who can go over the $9.99 limit for ebooks. When they are selling an ebook for $16.99 or a similar higher price they can go over the spending limits of their self-published counterparts and still make a decent profit, and their higher price point means they are taking less financial risk during the process.
Plus even if people don't buy the book (the 91% of people who were just browsing) they also create brand name recognition. The next time that 91% of people are in a book store and see a paperback copy of the book they might be more likely to buy it or at least pick it up to look at it.
Isn't There A Better Way To Advertise?
Actually, yes there is. Third Party Advertising on other websites with links to your books on Amazon or other book seller websites.
Consider this.
Imagine putting an advertisement/article about your book on a third party website that does book reviews, and the site in question offers this service for $40 for a permanent article about your book.
If your book gets 100 people clicking on the link per year from the 3rd party website, and only 9% of them buy the book, then you are making a profit. At $7 profit per sale you are looking at $63 per year in profits from 9 sales.
Good, now multiple that by advertising on perhaps 100 blogs/websites/etc that similarly post book reviews/articles/etc. Yes, it will cost you $4000, but if you manage to get 10,000 clicks on the links from those articles then you should make $6300 per year.
Even if you were not getting the 100 clicks per year from the website, you will still make your money back over time because the articles are permanent. It is really more of an issue of being patient.
Some websites might be more popular than others and garner more clicks for your books, but overall you are building yourself as a brand and you could even benefit from word of mouth if other people see your books, buy them, and then write blog posts, articles, Tweet on Twitter and other social media posts.
Now you don't necessarily have to build up these volume of 100 websites/blogs talking about your books in a single year. You could do 20 per year ($800 per year) over a period of 5 years and your results would be slower, but you would save money.
Is There A Cheaper Way?
Yes, of course there is. But it is more time intensive.
It involves you building your own website/blog and building an audience.
Likewise it is recommended you build a Twitter audience, and perhaps a Facebook one too. The Twitter audience is more beneficial because studies have shown that Twitter users have a tendency to be more literate, more educated, and more likely to buy ebooks/paperbacks. Facebook users in comparison don't read as much, but Twitter is ideal for authors as a platform.
The other big thing that is becoming popular for authors is YouTube. Video is increasingly the best way to reach more people and a broad audience. It is estimated that 85% of all internet content being consumed by 2023 will be video. If you are only producing text on your website/etc then you are limiting yourself to a smaller percentage of people.
So in a nutshell you should be:
- Making a website + blog for your writing.
- Making a Twitter account and build an audience of 5000+ people. 10,000 or more would be better, but it is possible to get 5000 Twitter followers in less than 6 months.
- Building a YouTube channel for the future.
Don't worry if you don't get huge numbers on Twitter or YouTube right away. There is a learning curve involved with these platforms, but the trick to succeeding is to keep trying. Social Media is effectively an "If you build it they will come (eventually)" type of platform.
Traditional Publishers like Authors on Social Media
There is a bonus benefit to having an active Twitter/YouTube accounts promoting your books. Traditional publishers notice these things. If you someday go to a publisher and try to sell them a book, if they are interested in you then they will no doubt Google you. If you are already famous on Twitter/YouTube/etc then they are more likely to take you seriously.
Traditional publishers also now expect authors to have Twitter/YouTube accounts promoting their books. If you don't have one already the publisher is going to be pushing you start one and get out there and start promoting yourself. If you are resistant to the idea then you may find they are resistant to publishing more books from you, unless you somehow manage to write a bestseller or if your book sells out its original print run and they decide to print more. In which case you are more likely to sell out the print run if you are active on social media.
Never underestimate the reader's ability to buy books from someone they talked to briefly on social media.
Also don't think that older writers are not on social media. They are. Margaret Atwood. Stephen King. Many of these older authors are very active on Twitter and YouTube.
Hot Tip - Avoid talking about politics or controversial issues on social media. J. K. Rowling for example (of Harry Potter fame) has really ruined her career by talking about her transphobia on Twitter and writing a series of transphobic books under a pseudonym. So yes, definitely avoid certain topics if you want to get more book sales.
If you want something to be quick and quality don't expect it to be cheap.
If you want something to be cheap, don't expect it to be quick and quality.
Amazon's PPC Advertising is good and fast, promising quick results and sales, but it is very expensive.
Third Party Advertising is cheaper and still good, but it is slower and it may take years for you to see your strong returns on your investment.
Building your own website and social media audience is very time consuming, but it is one of the cheaper options and still a good way to build a fan base.
Probably the cheapest (but least quality way) is to do nothing and just publish your books and hope people somehow magical find your books when you do zero advertising. Good luck with that. Have fun having zero sales, because is literally what you should expect to happen.
Conclusions / What You Should Be Doing
If I had to list what authors should be doing it is the following (in order):
1. Build a website.
2. Build a Twitter following.
3. Build a YouTube channel.
4. Third Party Websites.
5. Find a traditional publisher.
It is the dream of every writer to find a traditional publisher and sell lots of their books. It is possible you might skip straight to #5, but doing the first 4 things will certainly boost your chances if you can write a successful self-published book (or a whole bunch of them) and then try to convince a publisher to gamble on your genius.
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