R.O.I. on paid advertisements

Full disclosure: It was December 2020, and I wrote this post. I programed it for March 12th, 2021, but of course it went live at once. So, if you saw it then, you are not crazy and I’m not lazy, it did go out and I had to reel it back in. Hope you enjoy it.

Fair warning: there will be a little math in this post (I can hear some of you going “Yuck!”), but we need, as authors, to take a look at the business side of writing too. Let’s start at the beginning.

What is ROI? No, it’s not the name of a cowboy from a 1950s TV serial, that was Roy Rogers, and also it’s not the nickname Bruce Willis character John McClane adopted in Die Hard (which is a reference to the same Roy, I’m just saying). ROI stands for Return On Investment and is something authors must keep in mind when making writing a career.

Everything has ROI. The ROI for some things are easier to calculate than others. Here I will focus on paid advertisement, and, more specifically, how it compares between a debut novel and the ads for a novel that’s part of a series or if the author has a backlist.

An author can advertise in many different outlets. From some that are not common or often talked about, such as trade magazines, newspapers (usually local), and your local library system, to very common ones such as Facebook and Twitter ads, as well as ads on YouTube.

In a very rough manner, we can calculate ROI as follows:

Cost: Amount spent (actual payments or estimate of the monetary outlay for a service or a task)

Income: The net amount collected from sales (after taxes)

So, ROI will be Cost/Income. This will result in a decimal number. Usually, for ease of understanding, we multiply by 100 and now we have a percentage ROI.

In the case of authors, it is very important to set a time limit also.

Let me clarify that. You will not sell all the copies of your book on the first day and, hopefully, you will sell copies of that book for a few years.

Usually, the ROI is taken at the end of a period set by the author, or the account manager, if you are with a publisher.

We will look at independent authors for this exercise.

Let’s say you hired Facebook ads, Instagram ads, and Twitter sponsored ads for three hundred dollars. They will run for three months, January first to March thirty-first.

In that period of time, you sold four hundred and fifty books.

You are getting two dollars per book, about seventy percent, which is what Amazon would pay in this price range. Your total income, therefore, is nine hundred dollars.

So

Cost: 300

Income: 900

ROI= (300/900)*100= 33.33%

Your ROI on advertisement was 33%.

Is that good? Bad? Depends on your goals and how effective your ads were.

Now, if we make the same calculation end of June, we haven’t made any additional advertisement, we simply do the same calculation using the concepts as above.

In this period of time, January to June, you sold four hundred and fifty books (Jan to March) plus two hundred and seventy books (Apr to Jun) for a total of seven hundred and twenty books.

You are still getting two dollars per book because you haven’t changed the price. Your total income, therefore, is one thousand four hundred and forty dollars.

So

Cost: 300

Income: 1440

ROI= (300/1440)*100= 20.8 %

Better. Your ROI on advertisement was about 21%.

Your ROI will get “better” as time goes by because you are getting more sales with time. Hopefully, anyway. So you have to set a time, a cut-off date when you consider the ads are no longer in the minds of the buyers.

You may consider that your ads were good enough to stay in the mind of the readers for two weeks after they stop running, so you take into consideration sales of your books from day one the ad came out to the date two weeks after the ads stop running. Then you will have your ROI.

A “good” ROI is estimated to be 25 to 50%. Will that work for you? Well, we are indie authors, so let’s take a look at what else goes into our total cost.

We have to have our work edited and proofread (see my previous post on the subject) this will run, for a 65K work, about three thousand dollars total. Then you need the cover, which can go for as little as five dollars all the way up to several thousand, but we will stay in the realm of the reasonable and say it costs about four hundred dollars. You may want it professionally formatted, although services such as Draft2Digital (https://www.draft2digital.com/ ) will do it for free for your ebook edition, and that can run you two hundred dollars easily. So, bare-bones, the cost of your work is about thirty-six hundred dollars. Then you decide to advertise. This is why ROI is so important in an advertisement.

In the example we are looking at, you made nine hundred in the first quarter and seven hundred and twenty in the second quarter. All told, in the first semester that your work is out, you made a total of one thousand four hundred and forty dollars. You already put thirty-six hundred dollars in, so you are far from even.

So a good ROI of 25%, let alone 50%, is going to seem pretty bad.

We, as authors, have to take the long view.

Our advertisements should have a consistent theme, so that the next time we advertise, people will get a familiar feeling and recall, even subconsciously, our previous ad. That’s why your branding is so important (I will talk about branding in a future post). That’s why mascots are so popular (the owl of American Best, the Polar Bear for Coca Cola, the Pilsbury Dough Boy, Chester Cheeta, the Budwiser Clysdales, etc.) as soon as you see any of them, you know what’s coming. A color scheme might be used successfully here too (Coca Cola Red, Mcdonald’s Golden Arches, the tricolored Pepsy ball, etc.). There are many ways to make ads consistent without making them the same.

Here is where having a backlist is so important.

If the book we are advertising is not our only offer in the market, then any successful sale will affect our backlist too.

When we talk about a series, and we are advertising the third book, if we are successful in having a reader pick it up and enjoy it, we have a better than even chance that they will look into our backlist and pick up one or more of the previous books. If we write stand-alone, we have a good chance they will take a look at the author page (in Kindel, in Goodreads, or our own web page) and find out about other books by us that they might like.

Here, then, the ROI of the advertisement gets affected by the other books that readers might pick up after they finish the initial one.

Ideally, whether you are a debut author or have a few works under your belt, you should estimate the ROI based on total sales, of all your works, in a period of time of no less than six months. This way, you can see if the ads are actually driving sales or not.

Paid ads are not the only thing you should rely on for sales. So you have to be alert to discern what action resulted in what sales. Did you have a sales spike after a booktuber interview? Did sales go up after ads and then trailed off sharply when the ad went off the air? You have to come up with metrics to determine what and when your sales changed.

Yes, writing is hard enough, but if you want to make it into a career, then you have to deal with this side of it too, especially if you are an indie author.

What do you think? Have you calculated the ROI on your ads? Do you take the long view on the writing business?

Let me know in the comments, I’d love to hear from you.

Have a great day and thank you for reading.

Published by tjmanrique

I'm a SciFi, horror and fantasy writer. I will publish sometime in 2021. Mean time, My web page has my book cover concepts and a few short stories and stories about my writing journey.

2 thoughts on “R.O.I. on paid advertisements

  1. Understanding this side of being an author is probably one of the most important aspects to stress to aspiring beginners – the process is so much more complicated than simply writing, which I’m learning more and more each day! This was a valuable insight

    Liked by 1 person

  2. Thank you very much for the comment. I appreciate it. Indeed, being a published author is much more than simply writing. We all know writing is hard enough, but if you are going to make it a business, you have to apply yourself to many other things beyond the page. Again, thanks so much for taking the time to read the post and for your comment.

    Like

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