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I hope you’re having a great start to the year! I’m currently on vacation, traveling through Southern China, but I still wanted to take some time to resume my weekly Reedsy marketing newsletter after the Christmas and New Year break.
If you received and read the previous issues, you’ll remember that I was talking about how to market a series. In particular, I focused on read-through and return on investment when running ads.
If you didn’t get those, then make sure to read them through the links below — otherwise, the rest of this email will make very little sense.
Factoring KU reads in your ad ROI calculations
Now, the whole purpose of this series is to help you understand if you are making or losing money when running ads (whether they’re Amazon, Facebook or Bookbub ads) to promote a series.
With read-through, you factor in the benefits from future sales into your ROI calculations. But for those of you in Kindle Unlimited, there’s another crucial element we’ve overlooked so far: your ads can generate both sales and borrows. This is what today will be all about.
Important: if this all sounds like gibberish to you (or you hate maths), then tap here to go straight to the “Free Spreadsheet” part of this email.
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The great thing about Kindle Unlimited is that you have two income streams: regular sales, and KU payouts (per page read). The annoying thing is that this makes it even more complicated to calculate ROI on ads.
Take Amazon ads, for example. Their Sales and ACoS metrics don’t take KU borrows into account. And yet, there’s a high chance (depending on your genre) that when readers click on your ads, they’ll be getting the book through KU rather than purchasing it.
So a high click-through-rate with a low conversion (as reported by Amazon) might actually be hiding a high number of borrows. And depending on your book’s price, these borrows might be even more valuable to you than a sale…
So how do you account for this KU borrow possibility? The same way you account for read-through: using an estimate derived from your last 90-day (or more) sales and borrow stats. And I tip my hat off to Michael Cooper who first came up with this in his must-read book, Help, My Facebook Ads Suck.
What you want to figure out is the answer to the following question: if a reader comes to my Amazon book page, what is the probability that they’ll get the book through KU rather than purchasing it?
You can estimate this probability by simply looking at your overall ratio of KU readers vs. other readers. If you use BookReport, it’s very easy — otherwise, you can estimate your number of borrows by dividing your book’s total page reads by its Kindle Normalized Page Count (KNPC).
Just make sure you look at a big enough timespan that no promotions or spikes are skewing the data.
Then, simply take
- your total borrows across the series,
and divide them by
- your total unit sales across the series.
This will give you a KU/Sales ratio, which is effectively equal to that probability we were looking for.
For example, if your book sold 1,000 copies in the past three months, and BookReport indicates it got 1,500 borrows, then your KU/Sales ratio for that series is 1.5. For every two sales, you’re getting three borrows on average.
So if your Amazon Advertising reporting dashboard indicates you got 20 sales in the last week, you can estimate that your ads also drove 30 borrows, and factor that into your ROI calculations.
To do so, all you need to figure out is how much a full borrow is worth to you. In other words: if a KU subscriber gets your book and reads it in full, how much money will you get? You can estimate that pretty easily by multiplying the Kindle Normalized Page Count (KNPC) of the book by the latest monthly KU payout figure.
Written Word Media keeps a good record of the evolution of KU payouts in this post.
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Calculating your final ROI
Alright, we now have all the elements to calculate Return on Investment correctly. I’ll give you a hypothetical example below, so you understand how it all works together. If you don’t want to bother with maths, skip to the next section!
Let’s say John has a 5-book series, with book one priced at $0.99 and books 2-5 at $3.99. His read-through figures are as follows:
- Read-through to book 2: 60%;
- Read-through to book 3-5: 50%.
His KU/Sales ratio over the last year across his series has been around 1. That means he gets a borrow for every sale. All his books have a KNPC of 300, and KU’s latest payout per page was $0.005206.
So, how much can John afford to spend to trigger a sale of book 1?
Well, a sale of book 1, including read-through, would generate him:
$0.99 *35% + 60%*$3.99*70% + 3* 50%*$3.99*70% = $6.21
But every time John triggers a sale of book 1, it’s likely he’s also getting a KU borrow from another reader (which doesn’t show up in any reporting). This borrow of book 1 is worth:
300*$0.005206 = $1.56.
But this borrow is also subject to read through, so it’s really worth:
$1.56 + 60%*$1.56 + 3*50%*$1.56 = $4.83
So if we sum this up, John can afford to spend up to $11 to generate a sale of book 1. He won’t make that money back immediately, but over time, and on average, he will.
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Free Spreadsheet that’ll do all the maths for you
I know, I know, you’re a writer. You’re good with words, and not necessarily a whiz with numbers. Unfortunately, nowadays, authors don’t really have a choice: they have to get involved with marketing, and marketing is all about numbers.
But that doesn’t mean you can’t cheat a bit! That’s why, as a 2019 New Year’s present, I’m sharing a magical spreadsheet that does all the ROI calculations for you.
You can access it through here. Now, don’t try to edit it there (you won’t be able to). Instead, click on “File” in the menu and copy it to your Drive, or download it as an Excel file.
Once you have it, simply fill in the values in blue, and the spreadsheet will do the maths for you. It also has tabs for Amazon and Facebook ad campaigns where it’ll automatically calculate your ROI for those.
Hope you’ll make good use of it! Of course, if you have any questions about the spreadsheet, or this series on series (how meta!), just hit “reply” and let me know!
Happy writing,
Ricardo
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