Online advertising can be an effective, ROI-positive option in an author’s marketing tool kit for driving book sales and getting exposure to new readers, but figuring out the economics of auction-based ads can be a confusing and time-intensive process. Running profitable ads isn’t as simple as paying a one-time fee and calculating whether your promotion made money — with BookBub Ads and other auction ad platforms, you have to decide how much the readers you’re targeting are worth to you and how much you’re willing to pay to reach them.
While this level of control makes ads highly customizable for any marketing goal or budget, it also means that you are wholly responsible for creating ads that will generate a positive ROI. So where do you start?
One of the key campaign elements in running profitable ads is your bid, which is the lever that determines whether your ad gets shown to readers as well as the rate you pay to reach them. We’ve broken down how to think about your bidding strategy and created a handy template to help you decide what to bid on your next BookBub Ads campaign!
Note: While we’re focusing on the BookBub Ads platform in this post, the following bidding strategies and bid calculations can be applied to any auction-based advertising platform.
How does an ad auction work?
In the BookBub Ads auction, advertisers compete with one another to get their ads shown in our dedicated advertising spots. These spots appear at the bottom of our daily Featured Deals and weekly Featured New Releases emails, New Release Alerts, Preorder Alerts, weekly blog article summaries, and Recommendation roundups, so there are lots of opportunities to get your books in front of BookBub’s audience of readers!
There are six elements to every BookBub Ads campaign:
- Ad creative: what your ad looks like.
- Click-through links: where readers end up after clicking on your ad.
- Audience: who you want your ad to reach.
- Schedule: defines when and for how long your ad will be live.
- Budget: the total maximum amount you want to spend on an ad campaign.
- Bid: the maximum rate you want to pay to reach readers in your audience.
This final element — the bid — helps determine how competitive an ad is in our auction. The moment a reader opens her email, our auction compares every live ad campaign targeting that reader and shows her the ad with the highest bid. The higher the bid, the more competitive the ad, and the more likely the ad will be shown to readers.
How much should you bid?
There are two ways to bid on BookBub Ads:
Cost per thousand impressions (CPM). When you set up a CPM ad, you tell us the maximum dollar amount you are willing to pay per 1,000 impressions, where one impression equals one opened email. Each impression represents a reader who viewed your ad in her email.
Cost per click (CPC). With a CPC ad, you tell us the maximum amount you’re willing to pay for each reader who clicks on your ad, and you only pay for the readers who actually click rather than those who see your ad but don’t take any action.
In short, CPM bidding means you pay for readers who see your ad and CPC bidding means you pay for readers who click on your ad.
Step 1: Determine your goals
The first step in determining which of these two bidding strategies to use and how much to bid is to set your goals for the ad campaign.
Are you running tests to gain insights? If you’re in the process of running tests to optimize your ad campaigns (something we strongly encourage!), you want your ad to get exposure to a lot of readers as quickly as possible so you can determine what’s working ASAP. Using CPM bidding with a high bid will allow you to serve impressions and start collecting data right away. Use the range we display in the ad setup form to get a sense of what other advertisers are currently bidding.
CPC ads aren’t ideal for testing since our auction takes click-through rate (CTR) into account when determining how competitive a CPC ad is. While this ensures we’re showing readers the most engaging ads, it can muddy the waters if you’re running A/B tests. CPM ads allow for clearer side by side comparisons of results.
Are you interested in exposure and branding? If you want as many readers as possible to see your ad, high CPM bidding is the best way to ensure your ad gets a wide reach. However, the larger your audience, the trickier it can be to generate a positive ROI. CPC bidding can give you more control over your costs, but you risk reaching a smaller audience. Whichever bidding strategy you choose, if you’re optimizing for exposure you should bid on the higher end of the suggested range to give your ad the best chance of getting in front of lots of readers.
Are you focused on maintaining a positive ROI? You can run ROI-positive ad campaigns using both CPM and CPC bidding. The simplest way to determine whether you’re making back your investment is to run these ads without any other promotion during a set period of time and compare the amount you’re spending with the profit you’re making from your books during this time. Of course, this is a very rough estimate of your ads’ effectiveness, but can still give you a sense of whether the rate you’re paying to reach readers is too high. If you’re willing to do some math, a more exact method of running ROI-positive ad campaigns is to calculate a profitable bid based on the expected revenue of your ads. Move on to the next steps to learn how to calculate cost-effective bids!
Note: You’ll almost always need to spend some time and money testing out different campaign elements before you can start running ROI-positive ads. Don’t get discouraged if your initial campaigns don’t generate the clicks or sales volume that you hope for! We recommend starting out with total ad budgets of just $10 to $20 to get a sense for what works best for your book. Start by trying out different audience targeting and ad images to maximize your CTR, and once you’re happy with the clicks, begin calculating and fine-tuning for conversions and ROI.
Step 2: Calculate how much you expect to make for each book sale
In order to decide how much you should pay for readers who view or click on your ad, you first have to figure out how much money you expect to make when a reader purchases the book you’re promoting. The higher the expected revenue from each book sale, the more you can bid to acquire new readers and still make your money back. This is why it can be easier to get a positive ROI on ads for series books, which often lead to follow-on sales, or box sets, which tend to be both higher priced and an enticing offer for readers.
To calculate your revenue for a standalone book or box set, multiply your book price by your royalty rate and subtract any additional fees or commissions.
For a first-in-series book from which you expect readers to go on to purchase Book 2, Book 3, and so on, you can incorporate the revenue from series readthrough into the expected revenue for each sale of Book 1. Some authors use a tool like BookTrakr to track series sales, but you can calculate this manually, too! We’ve created a calculator that lets you easily figure out the read-through rate of a series and the overall expected return for each reader who purchases Book 1. Blog subscribers can download this template here:
Step 3: Calculate or estimate the conversion rate of your ads
After you calculate how much you’ll make for each book sale, you should figure out how many sales you expect your ad will generate.
The CTR of an ad lets you know whether you’re targeting the right audience and how engaging your ad creative is, but unfortunately not every reader who clicks on your ad will actually purchase your book. In order to determine how much each click is worth to you, you have to figure out how many readers who click on your ad are likely to convert to a sale (the conversion rate).
If you use affiliate links to track sales, it’s easy to determine how many sales resulted from your ad. You’re welcome to use your own affiliate codes in the URLs of your BookBub Ads campaigns (as long as you comply with each retailer’s terms of service!).
If you don’t use affiliate links, you can estimate your ad’s conversion rate. The best way to estimate a conversion rate is to halt all other promotional activities before running your ad and then compare your sales while the ad is running with your average daily or weekly sales for that book while no ads are running. This is an imperfect method, but if your ad is the only promotion running at a particular time, you can assume that any additional sales above your baseline average sales number can be attributed to the ad.
To calculate your conversion rate per click, you can divide the number of additional sales by the number of clicks on the ad and multiply by 100 to calculate your conversion rate per click.
To calculate your conversion rate per impression (the likelihood that a reader who sees your ad will purchase the book), multiply the conversion rate per click by your ad’s CTR. Our bid calculator includes a section to calculate the conversion rate of your ads.
Step 4: Back into a bid
Now that you know your expected revenue for a book and your estimated conversion rate, you can calculate what to bid to break even or make a profit on your ad!
These calculations are best demonstrated with an example. Let’s say you ran an ad for a $4.99 book at a 70% royalty rate, so your revenue per book is $3.49. Your ad had a 1.5% CTR, and using the formulas in Step 3, you’ve calculated that you had a 20% conversion rate per click and a 0.30% conversion rate per impression. Armed with those stats, you can now calculate the maximum CPM and CPC rates that will allow you to break even on this ad.
To determine your maximum CPM:
1. Multiply your conversion rate per impression by 1,000 to figure out how many sales you can expect per 1,000 impressions.
0.30% x 1,000 = 3 sales per 1,000 impressions
2. Multiply your sales per 1,000 impressions by your expected revenue from a book sale to determine the CPM rate that will let you break even.
3 x $3.49 = $10.47
This means you can expect to make $10.47 for every 1,000 readers who see this ad, so your CPM bid should be around $10.47 if you want to break even on this campaign.
To determine your maximum CPC:
Multiply your conversion rate per click by your expected revenue.
20% x $3.49 = $0.70
Note: The winning advertiser in our auction pays for clicks and impressions at the rate of second highest bidder. This means you will always end up paying less than what you bid, so you have some wiggle room to set your bids higher than the amounts we’ve just calculated. Your “Effective CPM” (the amount you actually pay for the readers you reach) should not exceed $10.47 and your “Effective CPC” should not exceed $0.70 if you want to make your money back on this campaign.
We’ve set up a template to make these calculations for you in our BookBub Ads Bidding Calculator spreadsheet! If you collect your data and enter it in the template, we’ll generate your revenue per book, conversion rates, and maximum eCPMs and eCPCs for you.
Contact us for help!
If you’re stumped as to why your ad isn’t getting the reach or results you hoped for, you can reach out to our partners team at email@example.com to get feedback and advice at any time. We’d be happy to take a look at your recent campaigns and offer suggestions to help you get closer to achieving your advertising goals.
Which parts of the BookBub Ads setup process do you find confusing or want to learn more about? Let us know in the comments!
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