Monday, 21 May 2012

Common Pitfalls for Indies (part 6): Overpaying for advertising

We had intended to finish up on 5 posts in this quick 'pitfall' blog series, but we're adding at least one more - to cover indie advertising, and how much you should be paying.

Yesterday was blogged about the physics model of book selling. Exogenous shock gives short term sales spikes when books are given exposure. We also opined that indie books don't generally get much exogenous shock. There are rare exceptions that somehow get media coverage. The big name earners often get asked to do interviews, give speeches, or throw release parties. I suspect this is a no go for virtually everyone on this blog (though by all means, do send out press releases just in case - it doesn't cost much!).

Instead, any exogenous shock for us is in the form of advertising. The most obvious exogenous shock is in free downloads. At the start of the select program a thousand downloads would see a book ride a wave of popularity for a week or two after, which might snowball into ongoing success. Even now, with the rush of authors jumping on the Select bandwagon, it is still possible to make it work. You just need alot more downloads (both because of algorithm changes, and oversaturation in the free market). Even if you don't get a sales spike, you'll still gain long term through the 'also bought' system as it's essentially giving you thousands of tiny posters for your book all over Amazon.

For those of us who don't use select for whatever reason, there is a temptation to buy advertising. Unfortunately most authors know nothing about online advertising prices.

There are, broadly, three types of advert used for ebook advertising:
1. Pay per impression (i.e. how many times your ad is seen)
2. Pay per click (i.e. how many times someone clicks your link)
3. Pay for duration (i.e. one day, one week, one month).

Frankly, many of the advertising opportunities indies go in for are hugely overpriced.
Pricing on some sites is done as 'eBook deal of the day' blog exposure style. You give them $50, $100 or even more and they give you a day, a week etc. The problem is this has no quantifiable guarantee with it.  Traffic mileage and type varies hugely. If you were to advertise on this blog (This is purely theoretical - I don't sell adverts, and never will) then you'd get somewhere between 20 and 300 impressions per day.

Most pay per impression costs are rated in CPM, cost per mille. This price per thousand varies hugely. Some large scale sites can be as low as $0.25 (yes 25 cents) for a thousand views. So for me to give you that rate on this blog, I'd be charging you roughly a dollar a month (or $12 per year). Clearly, that's on the 'too low' end of the market. At the top end of the CPM very nice sites can be as high as $40 per CPM. These are your high converting very targeted websites. So the same 4000 or so impressions per month would run you to $160 for a month, or $1920 per year. Again, this is the extreme top end. Any site that has a primarily author audience won't be worth anywhere near this as the conversion won't merit the rate.

Typical conversion in general populace is sub 1% almost universally. So if you pay me $40 to be exposed to 1000 impressions you'll get, at best, ten clicks through to your book.

Out of those you might get one or two sales. Clearly that isn't cost effective.

Let's take a look at the typical $2.99 indie. Plenty of us are in this price range. After the US 30% witholding (or a similar amount outside the US post tax treaty), Amazon's 30% and delivery we'll clear a net of say $1.40 for easy maths.

Where then, is the sweet spot in CPM advertising?
Remember our extremes:
$0.25 for 1000 = 2 sales = $.10 a sale
$40 for the same 1000 = $20 a sale.

Clearly then if we get 2 sales on average per CPM then if the cost per CPM is more than $2.80 we're on a beeline to lose a fortune. Unfortunately most of the advertising offered to authors is well over this (I saw on the kindleboards someone trying to hawk one month slots on a dead blog for $20 per month. Sounds cheap but still not worth it if you don't get enough sales to justify it).

Now, I'm going to assume you want to make a profit on your eBook. So if $2.80 is the breakeven point per CPM, and $0.25 is the market floor price for generic CPM you want to be somewhere in the middle.

What is a fair percentage to give up to the advertising guys? I'd say no more than a quarter ever. Otherwise you'll struggle to make any real money. That would give us a rate of $0.70 per CPM. I think this is probably the ballpark. So, if you are looking at cost per impression advertising - look at your return in terms of conversion. If it's per duration, look at the number of impressions during that duration to get an equivalent rate.

Then remember some impressions will be the site owners, you checking the adverts, and bots crawling the net. Plus, the source of your data could well be off by a fraction. This all eats into your conversion rate. Then figure that if you are on a site with 4 adverts, you'll see at least a 75% drop off in conversions. If the page is covered in adverts, then it's going to fall exponentially.

Just to give you a market standard for comparison (and note that these are much more likely to convert as they are targeted at specific subgroups):

Google = $1.44 per 1,000 impressions
Linkedin = $0.10 per 1,000 impressions
Facebook = $0.19 per 1,000 impressions
(As an aside, TV is typically $10 per 1000 impressions. Print media about half that.)

For me, CPM is NOT an effective SALES tool.
Advertising however can be a very effective BRANDING tool.

Sometimes the benefit isn't in direct sales, but in name recognition. Authors are a kind of minor celebrity, so they need to get exposure to keep up the sales. People buy from names they recognise and trust, so you want your name all over the place.

The best way to do this is to buy adverts on a pay per click basis. Why? Because then if they don't click through, you don't pay anything. This makes all those views free. If you know that 1 in 5 who click through will buy, and your book yields $1.40 after tax then you can be pretty specific about how much you want to pay. Taking our example from above, if we want to give up 1/4 max to advertising, that's $0.35. If 20% of click through buy, we can safely offer $0.07 per click through, and know we'll get a fair deal.

For me, the PPC model is not just a sales tool. While it can give you a nice predictable conversion rate, it also means you get seen by alot of people without paying for it. If only one in one hundred click through you've had one click, and one hundred impressions for your $0.07. You can see that, the more niche your eBook, the larger the potential gain here (and, as long as you set the price per click at a sensible level, the risk is de minimis).

Branding is the name of the game here - We cannot afford to be seen as 'just another indie author throwing a document together and slapping it on the internet for sale'. We have to approach indie e-tailing as professionally as possible. If we overpay, we inflate the rates for the next poor shmuck to come along and pay $100 for a day's worth of advertising (which, at linked in rates would have bought 1000 CPM, or A MILLION views!). If you're shelling out - think how much more you can get elsewhere. It might be less targeted, but often these blogs don't target well either. Not all authors are readers, and not all readers read your genre. If in doubt, pay by click - then the users seeing the ads self select based on interest. You might not get many click throughs, but at least you only pay when you do.

1 comment:

  1. As an addendum, social media has a dramatically lower conversion than banner adverts.

    In the last 24 hours my tweets have reached 409,422 twitter accounts generating 755,594 impressions.

    If I'd paid $40 per CPM for those I'd have spent $30,200. At $0.25 per CPM I'd have spent $188.75.

    Either way, not justifiable. Per year, at top end rates (assuming a similar number of impressions per day) I'd be talking about ten million dollars a year. Clearly insane. So if someone offers you a tweet to a thousand users -expect to get no sales back.