So I posted this to one of my lovely FB groups and thought I’d share it here in case anyone is searching for help on this topic. I don’t speak for Amazon. I’m just another writer who’s been trying to understand how to work Amazon ads and was hoping this could help some of you beginner advertisers out there. This post is regarding use of Amazon’s advertising dashboard.
Choosing the right Cost Per Click is important so you don’t blow your budget without making any sales. With authors, it’s nearly impossible to make money on books priced under $2.99 which are not in the KDP Select program, in my experience…and from what I’ve encountered in the multiple author groups I’m in. Below, I’ll help you understand why.
It’s critical that you take what I’m about to show you and try to calculate this for yourself, but also that you understand how many variables there are. Impressions, clicks, customer interests, these things change every day. I just want to help clarify how you can maintain some control over your goals with your advertising. You can use this method on other platforms, adjusting the costs etc accordingly.
I’ve been working on this CPC thing and have made a chart that helps us figure out how to pick the Cost Per Click and also what we should be charging for our books to make this insanity worth it. There are 2 charts on the same page of the link below (AMS Ads Breakdown.xlsx).
1 is for CPC and how many clicks it takes to get to $10 (As a simple, general number).
2 is for looking at how many sales it takes to make $10 so you can look into cost of your book and how the change in CPC affects your chance of income.
I was really worried about spending too much. I think a lot of us are. I wanted to make this more scientific rather than some crazy numbers floating in the ether. And of course if someone sees an error in my table please please correct me and comment below! I haven’t had math since college and relied a lot on Excel formulas. Anyway… We need a way to know if our click numbers are getting too high for the amount we earn in royalties from sales… that’s what this is for.
Say we have a book that costs $2.99 on Select’s 70%. (Remember, with 70% they take out a delivery fee that’s dependent on book length.) So for me, 70% of 2.99 is $2.09 minus about $0.23 for the book’s delivery fee. (I rounded this up in the chart to $0.25) – but I honestly don’t know if they take the delivery charge first or after they calculate our royalty. I took it after in the table because I’m a dummy and forgot it until after and am too lazy to redo the thing. My brain already hurts.
Okay so we’re working with $2.09 royalty – delivery of $0.23 for ending royalty of $1.89. If I want to make $10 in profit, I need to do this: $10 profit / $1.89 per book = 5.29. Five sales won’t make me quite 10 bucks, so I round up to 6. Six sales will make me ten bucks at this price for this book.
Here’s where it gets tricky. You’ll need to know your ratio of clicks to sales for this to work. You can figure this from your dashboard.
Say you get 1 sale for every 10 ad clicks. If you want to make $10 you need 6 sales (from above).
So… 6 sales x 10 clicks is 60 total clicks.
60 clicks = $10 in royalties at your price, for that one book, for that ratio of clicks to sales.
Got it? Take a breath!
In order for us to at least break even, those 60 clicks have to cost us only $10, right? $10 sales = $10 cost of advertising. $10 cost / 60 clicks = .16666 So we have to round down to $0.16 Cost Per Click and no higher or we lost money in this situation.
For Summary Here’s My Stats:
Book Cost to Customer: $2.99
My Royalties at 70% minus Delivery of $0.23 = $1.89
To get $10 in profit I need 6 Sales
(Pretending I’m this lucky) I make 1 sale for every 10 ad clicks.
To make 6 sales I need 60 ad clicks
$10 Sales = $10 spend to break even (for reference…instead of losing money)
$10 spend / 60 clicks means each click must cost $0.16 or less.
So I must set my CPC for that.
Of course this is a super rigid way to look at this situation. There are so many variables in impressions, click-to-sale ratios, and delivery fees that its hard to know. But I hope this brings some clarity to those of you who are struggling too. Remember that with sales (even if you aren’t making money yet) there are more people with your book, more readers to review it, and Amazon indexes your book with the customers’ other purchases so you have the inherent likelihood of more visibility.
Don’t be discouraged. Keep your cost per click low and refine those ads! I hope this helps. And please holler if I screwed anything up! Or if you have questions! Best wishes and I hope you are well and safe where you are!