TL;DR Advertising ROI is a simple formula: determine the amount of money you earned from your sales (Number of sales x price of book) and then subtract the amount of money you spend on advertising that book.
It gets a little more complex when you have more than one book and more than one ad platform. Here are the details.
Figuring out Your Advertising ROI
So you have gone through the trouble of learning how to set up Facebook ads, Amazon ads, or other ads for your books. Great! Now, how do you know if they are “working”? Well, the simple answer is to do some math to figure out your advertising ROI. ROI is simply your return on investment. Are you making more money from advertising than you are putting in?
“Math?” you say. “I am a writer. I don’t do math.”
Well, you do now, and I am going to make this very simple for you. Then we will talk about per-title ROI and overall advertising ROI. Ready? Well, even if you’re not, here we go.
Individual Book Advertising ROI
If you have more than one book out, you need to determine the ROI for each book. This means you need to track your advertising by which book or books that ad is targeting. That should be easy: usually, any ad on Amazon, Facebook, or BookBub targets a specific book, unless you are targeting a series page. But you can track that, too. More in a sec, but all of this is important if you are treating your writing as a business.
The math we will do is not hard but let me give you an example. Think of it as a word problem in reverse. I’m going to give you the way to find your answer, and all you have to do is plug in numbers.
Positive Book Advertising ROI
During the week of January 31 through February 6, my book Harvested sold 50 copies. We’re going to pretend they were all digital copies on Amazon for simplicity sake, even though the book is also available in print and audio formats. During that time, it was on sale for .99. How much money did I bring in?
50 x .99= $49.50
Could I have just rounded that up to $50 and made it easy? Sure, if you want. But exact numbers are better whenever possible. Now, during that week, I ran a BookBub ad to that same book. We could dive into the specifics of that ad, but rather than doing that, we will simply say the ad cost us $25 overall in ad spend (I didn’t pay myself for creating graphics, but that is another blog post about overall profit. We’re just talking ad profit here)
This math is easy, too. I simply take what I made and subtract what I spent.
$49.50 – $25 = $24.50
That means that the ad was profitable overall, and that’s a pretty good profit margin.
Negative Advertising ROI
But what if the opposite happened? Let’s say we had the same scenario, but instead of a $25 ad spend, my ad spend was $75? Well, now I have flipped the formula, and I lost money. I still grossed $49.50 from those fifty sales. But I spent $75.
$49.50 – $75 = -$25.50
Negative numbers generally show up in parenthesis on spreadsheets, so it would look like (25.50) after you do the math. What happened? Well, we spent more than we earned. At this point, writers often say, “See? Paid ads don’t work!”
We won’t go into why or why not your ads may have worked or not worked here. That is another discussion. All we know at this point is that “something went wrong.”
So for the sake of this particular article, we have figured out if we have lost money or made money with our advertising on this one book.
Multiple Book Advertising ROI
Hopefully, you have more than one book or plan to have more than one. If you are running ads at the same time to more than one (you should be) you will have multiple formulas like the one above.
So let’s say I have my book, Overdoses in Olympia, on sale for .99. (It actually is. As the first in a series, it is always .99. As there are thirteen books in the Capital City Murders Series, it is designed to lead people into the series, where the other books cost more. So if I have the example above, and I spend $75 to get $49.50 in sales, that might be okay if the readers also buy more books in the series. It is still not ideal, but it can work out in the long run.
I won’t go too deep into that formula, because we are just talking advertising ROI we can measure in this piece. In this case, that ad is a negative ROI and a loser.
However, if Harvested sells $49.50 worth of books and I spend $25 on ads, now for the two books, so for my adverting budget for the week, I am now only down -$1 without figuring out what we call “incidental sales” of other books.
For both of these books, that could include audiobook sales and in the case of Harvested, print sales as well, even though that is not the format the ad was targeting. Since those other things are on the book landing page on Amazon, the buyer could click on those instead.
Even that set aside, if I throw in one more book, let’s say my book Stray Ally, and it is similar in profit to Harvested, then overall my book advertising that week was profitable. In addition, I know what books are profitable too, so where I can add more advertising to make my overall fiction writing more profitable.
What’s the formula for this, you ask? Well, simple. We simply add all the sales revenue from all of our books, all the advertising money we spent, and subtract. So it looks like this:
Sales of all three books: $148.85
Add spend on all three books: $75 + $25 + $25 = $125
For these three books, we are profitable to the tune of $23.85.
Now, of course, these are made up numbers and not very good ones. If you are running ads for a book and you are spending $75 to get $49.50 in sales for a single week, you probably have something wrong somewhere in the process, and you would stop that ad until you fix whatever it is. However, a return of $49.50 from $25 in ads is pretty good, so either number is likely pretty unrealistic, they just make the math simpler.
And that’s it for figuring out ROI. What you do with that information is a different story, and one for another post another day. So is the potential profit from series and determining if an ad run to a series page is profitable, and we will explore those later.
For now, happy advertising.