There’s more to advertising on Amazon than just finding a bunch of great keywords and plunking them down, waiting for the money to roll in.  Amazon advertising is a complex system, and the key to squeezing the most profit out of it is in truly understanding how it works. This long and detailed breakdown by advertising expert Ginger does just that, giving you the how and why the system works the way it does, as well as a number of tips and examples to help you get the most out of your keywords and Advertising on Amazon in general.

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I paid my money – where’s my profit?

Like many authors, when Amazon launched their Amazon Marketing Services – now Advertising on Amazon – I was stoked.

FINALLY, I’d thought – a way for me to throw money at my books and get them in front of the readers who want them! It seemed almost too good to be true – my book appearing in the searches and product pages of similar titles, and surely tons of sales coming at me as a result…

But, like many things that sound too good to be true, it turned out not to work that way.

I got my fingers seriously burned when I first started experimenting with Advertising on Amazon – spending a lot of money in a very short space of time, and seeing practically nothing in return for it. Over a year ago, I even took Mark Dawson’s course on Advertising on Amazon and was astonished to see him admit (this was in 2018, so things have changed since ) that his experiments produced nowhere near the return of investment as his Facebook advertising.

I nearly gave up – but then I spoke to a number of advertisers and slowly started to realize that the problem wasn’t Advertising on Amazon – but my understanding of how it worked, and what kind of impact I could expect it to realistically have on my book sales.

If you’re thinking of investing in advertising on Amazon, this article is for you – so you can jump into it with your eyes open, and get a realistic idea of how effective it can be to sell copies of your books.

How does Advertising on Amazon work?

I had pretty much thrown in the towel with Advertising on Amazon during my first experiments with it – until I got speaking to some old ecommerce pros from my agency days, who gave me a sharp, hard dose of reality.

“Advertising on Amazon wasn’t designed for you, Ginger – you writers just get to use it.”

Essentially, I’d ignored the fact that Amazon’s advertising platform was design to sell a lot more than just books; and almost any vendor on Amazon’s platform could access the network in order to run adverts on it – for everything from mobile phone cases to back-to-school supplies. The first and most important thing to realize about Amazon’s advertising is that it’s a robust, complex and powerful ecommerce platform; but needs to be approached as such.

What does that mean exactly? Well, most people are familiar with Google’s advertising platform, AdWords, and the Amazon platform is actually very similar to how Google advertising works. Both are hugely complex, incredibly powerful ways to drive potential purchasers to your product; but a significant amount of thought, work and investment needs to go into making your campaigns run efficiently – and it doesn’t work overnight.

Just like Google Adwords, an Amazon campaign is reliant on throwing your products in front of people who search for related things. Just like with Google Adwords, you only pay for this advertising if one of the people who sees your ad actually clicks on it. Finally, exactly like Google Adwords, if you end up paying more for clicks than you’ll receive in profit for selling your product, you’ll end up taking a loss from advertising. 

For many authors, Advertising on Amazon is their first introduction to the world of ecommerce – and sometimes online advertising in general – and that’s why it can have such a steep learning curve. It’s VERY important to manage your expectations when embarking with Advertising on Amazon, but it’s also worth remembering that it can be a very powerful, affordable and cost-effective tool to achieve your goals.

When Readers see your adverts

I recently wrote a blog post complaining about just how quickly Amazon had gone ‘all in’ with their Sponsored Content – using the example of how you’d have to scroll down ‘below the fold’ to see actual books by an author you searched for, including National Medal of Arts winning writer Stephen King. In fact, try it yourself – go to Amazon and type in Stephen King’s name and you’ll probably see something like this:

Yep, rather than searching for Stephen King’s books and seeing Stephen King’s books, you’ll actually be offered no less than three different adverts first. For a customer, this can be intensely frustrating – and I doubt Stephen King is all that happy about it – but for an advertiser, you can instantly see the power in Amazon’s strategy. If you can get your book into this search, you’re having it shoved front-and-center into the face of somebody clearly on Amazon looking for books.

Likewise, if you go to a product page for a Stephen King book, the product page will automatically scroll down when it loads to present you not with the book details; but a ribbon of ‘Sponsored Content’ featuring more ads like the ones above. You actually have to physically scroll upwards to see the details of the book you actually clicked on. Again – intensely frustrating for readers, but a potential boon for canny advertisers.

The opportunity, of course, is to have your book featured here – but how will that impact your book sales? That’s the real crux of the matter – and where I, and a lot of other authors, often have unrealistic expectations about the impact Advertising on Amazon can have; especially if we’ve used platforms like Facebook to advertise in the past. 

Slow Burn Versus Fast Sell

When you’re planning the promotion, marketing and advertising of your books, there are a lot of options to consider – including paying to be included in third-party newsletter, advertising on Facebook or Twitter and, of course, Advertising on Amazon. 

For many self-published authors, advertising on Facebook or running their books in a newsletter was their first introduction to digital advertising – and the interesting thing about those two advertising options is that they tend to deliver an instant payoff. When you run your book in a newsletter, you’ll see an influx of downloads, sales or borrows when that newsletter hits subscriber’s inboxes. Likewise, Facebook has a pretty immediate uptick – as soon as you start running your ads, you’ll start seeing people clicking through to your product page and (hopefully) buying your book.

Advertising on Amazon – because it’s based on a more traditional ecommerce platform – doesn’t quite work like this. Instead of the instant hit from advertising, Advertising on Amazon is reliant on people actually searching for the keywords you use to drive your campaign, and the bids you attach to them. If your keywords aren’t being searched all that often, or if your bids aren’t competitive, you’ll find that not only isn’t anybody buying your book, but not that many people are even seeing your advertisement!

In fact one of the most frequent frustrations for new users of Advertising on Amazon is simply getting them to spend your money!

The opposite problem is when you get Amazon to spend tons of your money – delivering lots of clicks to your product page – but none of them translates into sales. It’s frustrating to see your daily budget exhausted time and time again, with nothing to show for it.

The crux of this issue – on both sides – is that you have to manage an Amazon Advertising campaign.

Unlike being included in a newsletter or running a Facebook ad, the whole basis of an Advertising on Amazon campaign is to produce a cost-effective, slow-burn campaign that you can afford to run almost continuously in the background; having tweaked it to consistently deliver more in sales than it costs you in advertising. 

But to say ‘that’s not as simple as it sounds’ is an understatement – and it’s very important to get an understanding of how Amazon Advertising can work best for you, and the time and work required to get it to that level.

Advertising Your Books

To participate in Advertising on Amazon you have to select the book you want to advertise, tell Amazon where you want your ads to appear, and then how much you’re willing to pay for people to actually click on them. You can target your ads by product category, similar products or – the generally accepted best choice – specific keywords that appear in the searches of Amazon customers, or are related to product pages that contain the ‘Sponsored Content’ ribbon.

When you run a campaign, you copy and paste keywords in to drive the placement of your ads – up to a thousand of them! Over the course of your campaigns, you’ll see which keywords work for you and which ones don’t; and if you have the time and energy, you can use this information to tune your campaigns to deliver a consistent Return on Investment – hopefully.

Here is an example of three keywords from my recent campaigns – all the names of authors who write books similar to mine – and this screenshot shows all the information you need to understand. This isn’t the default dashboard screen – I clicked on the ‘columns’ button and ticked all these additional boxes to create this at-a-glance setup:

Let me break this down by column:

• Active: This is a button that tells Amazon whether to use this keyword or not. If you find you’re spending too much on clicks for this keyword, but not getting enough sales to justify the investment, you can use this to deactivate individual keywords whenever you want.
• Match Type: This is how closely you want Amazon to match your keywords. Broad means that Amazon will potentially show your ad to anybody searching for broadly relevant keywords. You can limit this match type to specific, case-and-character specific matches, or very broad ‘kinda like’ matches depending on how specific your targeting is. I generally stick with ‘broad’ since it allows for typos and out-of-order words without presenting my ads to completely mismatched audiences.
• Suggested Bid: This is how much Amazon thinks you should be bidding for your keyword. We’ll go more into bidding below, but essentially any time an Amazon user runs a search, there might be many, many other authors bidding for their ads to appear in the search results. Amazon will be more likely to place your book in that ad placement if you are making the highest bid, combined with the likelihood of potential customers to actually click on it (since that’s the only way Amazon actually gets paid.)
• Bid: This is the amount you’re actually bidding for your ad to appear. As you can see – my bids are ridiculously low at just $0.05 cents, compared to Amazon’s suggestion of between $0.43 and $1.08. This is because I use tweaks in the campaign settings to boost my bid depending on certain circumstances – more on that later.
• Impressions: Now we get to the performance of these keywords. This is how many times your ad has appeared in people’s searches, or on the product page of other author’s books. The impressions here are fairly modest, but that often happens when you use specific authors as your keywords. However, the more impressions you have, the more you know that both your keywords are reaching an audience, and your bid is set competitively, so your adverts are appearing even though other authors might be bidding for the same keyword.
• Clicks: This is where things get interesting. Clicks are when somebody sees your ad – they’re one of those ‘impressions’ – and actually clicks on it. Whoooohoo! Good news – that person is now headed to the product page for your book. The bad news – you just had to pay for that click, so if they don’t buy your book – you just spent money for nothing. 
• CTR: This is your ‘click through rate.’ This shows how often your Impressions convert into Clicks. This is the first really useful bit of information Amazon gives you; revealing how hard that keyword is working for you. If you’re getting lots of impressions, but few or no clicks, the audience seeing your ads either don’t like the cover or appeal of your book, or you’re hitting the wrong audience. Keywords with a high CTR suggest that you’re reaching the right audience and people like the cover of your book – but remember, it doesn’t mean anything unless they click that ‘buy now’ button!
• Spend: This is how much you’ve spent on this particular keyword over the length of your campaign. This is important because it allows you to see which of your keywords delivers the most economical clicks, and how much you spend to (hopefully) get a sale.
• CPC: This is the Cost Per Click, and averages out your total spend so you can work out what your average Cost Per Click actually is over the course of your campaign. In reality, you might pay more for one click and less for another, but this figure is useful for working out generally where your money is being spent.
• Orders: This is what you want to see! The number here indicates the number of Impressions that have become Clicks and then turned into paying customers when they Order your book. Obviously you want as many of these as possible – as long as the price you pay to get them isn’t more than the profit you receive from your book!
• Sales: Amazon helpfully adds up the price of any and all books you sell using that keyword, so you can compare it to the Spend at a glance. If you’re Spend is more than your Sales, you know you need to tweak your campaign.
• ACOS: Finally, Amazon does that math for you – turning your Spend and Sales into a percentage. 100% ACOS means that every dollar you spend on advertising results in a dollar of revenue. If your ACOS is lower than 100%, it means you’re profitable.  For example, an ACOS of 25% means you’re spending a quarter for every dollar you earn. Of course, given that Amazon might be paying you 35% royalties or 70% royalties – plus the fact that Page Reads through Kindle Unlimited aren’t included here – the ACOS is only really of limited benefit. It’s a good at-a-glance guide to the health of that keyword, but by no means the answer to everything.

At the end of the day, the only thing you should really be worrying about is your bottom line – that you’re spending less that you earn on the sales you generate from your books. To calculate this, you’ll have to work out how much you really earn when you sell a book, and work to keep your advertising costs low enough so that you average out with a profit.

The three keywords I’ve shown above are strongly performing ones – with the top one requiring just $0.62 in investment to generate $7.98 in sales, via two book sales. So on paper, a 7.89% ACOS suggests for every dollar you invest in that keyword, you’ll earn over $0.98 in profit. However, that’s not quite the case.

You have to use the following math to figure out how effective your advertising is:

There’s an added layer of complexity if your books are part of Kindle Unlimited, as you might end up getting an increase in revenue from page reads which aren’t tracked as sales. Currently, Amazon offers no way to follow this – but a very simple way to gauge whether your advertising is working or not is to compare an extended period in which you weren’t advertising your book against the same length of time in which you were, and see if there is any significant uptick in page reads that could be attributed to KU subscribers clicking on your ads and borrowing your books.

This really is the most important step.

Peter Drucker is credited for coining the phrase: “You can’t manage what you can’t measure” and when it comes to Advertising on Amazon, that’s complete accurate. Unless you know how much profit you get from a book sale, and you know how many clicks end up delivering a sale, and you know whether you’re making a profit or not, there’s really no way to effectively manage your Amazon advertising short of just throwing money at it. 

I’m not sure about you, but my book sales haven’t reached the stage in which I’m willing to do that… yet.

Wait… How does the bidding process work?

One thing that might cause you immediate confusion is looking at the screenshot above and wondering why my Bid is set to $0.05 – a shiny nickel – and yet my average cost per click is as high as $0.32. To explain this, we’d have to look into the whole bidding process, and what versatility you have with it. This is very important so worth learning.

On every search that a user types in, and every product page on Amazon, there are sections left blank for Amazon’s algorithms to fill with ‘Sponsored Content.’ Every author who is using Amazon Advertising tries to get their book placed in these blank spots – depending on how relevant they are – and Amazon has to pick and choose which books to actually show to potential customers.

This all happens in the blink of an eye, so it’s up to Amazon’s computers to figure out what is the best balance between:

1. Serving up ‘Sponsored Content’ that the person shopping on Amazon might actually be interested in
2. Serving up the ‘Sponsored Content’ most likely to result in a click – because that’s how Amazon get paid
3. Getting the most money from that potential click

Forth on the list – part of the process, but not a priority – is whether or not that click will result in a sale for you, the author, if your book is featured. You have to remember where you fall on the list of priorities, because it will make you a little more strategic about how you approach it (possibly also a bit more cynical about the whole process.)

So – somebody types in a search. Amazon immediately looks at all the authors who have bid on the keyword that this visitor to Amazon is typing in.

Your ‘Bid’ is how much you’re willing to spend to earn a click from that keyword, and Amazon will choose the authors with the highest bids so that they can make the most money if the user actually clicks on that ad. Therefore, if you bid high – in the realm of Amazon’s ‘Suggested Bid’ – your bid will be competitive, and likely to be picked.

In that way, it’s almost like a blind auction – or The Price is Right – with authors having to balance bidding a competitive amount while also trying to reduce their overall advertising spend by paying as little as possible.

Fortunately, there are some lesser-known tricks to help keep your bidding low, while still being competitive enough to earn impressions – as in, have your ad appear:

Pick non-competitive keywords.

While very broad keywords like ‘thriller’ or ‘MC romance’ will result in a lot of impressions, you’ll have to bid quite high to earn them, since these more general keywords have a lot of authors bidding on them. One way to reduce your spend is to pick non-competitive keywords – like author names, rather than categories or genres – because fewer other authors will be competing for those keywords and your bid can be lower. Because fewer Amazon users are searching for these keywords, your overall impressions will be lower – so you can compensate for that by picking MORE keywords. It’s better to earn 50,000 impressions from 50 non-competitive keywords than 50,000 from 5 highly competitive keywords. Remember, Amazon’s ‘Suggested Bid’ provides a good indication on how competitive a keyword is.

Bid low, and pick up the scraps.

Most authors set a daily spend limit on their ads – and this means there’s money left on the table as the day progresses and those authors spend their daily limit on higher-priced bids. By the end of the day, users are still searching Amazon for reading material, but because the authors with higher bids have already spent their daily limits, you may find your lower, not-very-competitive bids suddenly end up earning a lot of impressions. You’re basically swooping in like a vulture, for the leftovers – but there’s still plenty of meat left on those bones, so it’s a strategy you might find works very well for you.

Use Dynamic Bids and Adjust Bids by Placement.

Another really clever way to get more bang for your buck is to use the Dynamic Bids and Adjust Bids by Placement settings when you first create your ad – or click on ‘Campaign Settings’ to adjust them after the fact.

Dynamic Bids give Amazon permission to increase or lower your bid according to the specific chances of it appearing. The default setting is Dynamic Bids – Down Only. This allows Amazon to reduce your bid if you’re the ‘winner’ of the auction for your book to appear, but your overall bid is higher than any of your competitors. For example, if you’re bidding $1.00 on the keyword ‘paranormal romance’ and the next-highest bid is only $0.59, then Amazon will let you ‘win’ that Auction, but only charge you $0.60 for that bid, because that’s all it would have taken to win.

Very few authors select the next option, which is Dynamic Bids – Up and Down. This gives Amazon permission to reduce your bids, as I just outlined, but also increase them by up to 100% – effectively doubling your bid – if “your ad may be more likely to convert to a sale.” This means you can bid $0.30 on a keyword, but if Amazon thinks your book is likely to sell as a result of being advertised, it will double that bid to a maximum of $0.60 in order to give you a better chance to appear. This means you might end up spending a bank-breaking $0.60 – but if you earn a sale out of it, that might be worthwhile!

Finally, Amazon offers Adjust Bids by Placement, which will multiply your bid by up to 900% if your book is more likely to appear in the top of the first page of search results, or on a specific product page; as these are the placements most likely to convert to a click. I tend to set my bid super low – just a shiny nickel – knowing that if my book appears on the top of a search for my relevant keyword, I’ve given Amazon permission to boost that bid 900% – from $0.05 to a much more competitive $0.45. 

This tool really enables you to cherry pick the best placements for your ads – so while you end up paying pretty much the same per-click as you were previously, you’re getting much juicer placements for those impressions.

Be warned, though – remember that both Dynamic Bids and Adjust Bids by Placement can stack; so if Amazon thinks your advert will be more likely to convert to a sale, it will first double your bid using Dynamic Bids, and can then multiply it by up to 900% in order for your book to appear in the top of search results. What does that mean? Well, my very modest bid of $0.05 can actually be boosted up to a whopping $0.90 if Amazon thinks the placement is good enough. Be aware of that – because while hopefully you’ll get more impressions and clicks as a result, you’ll still end up spending a lot more ‘per click’ than your initial bid.

Bids and Managing Costs

If you’ve been running Advertising on Amazon for any period of time, you’ll have gathered some data about whether or not your campaigns are working – we wrote a blog post that explained the quick takeaways you can gather from the performance of your ads. If you’re frustrated with the performance of your ads, have a look at that for some pointers.

Long story short, you want to earn more in profit from your advertising than you spend.

It’s not rocket science, even if all that talk about CTRs and ACOSs sounds like it might be. The gap between your spend and your sales is called your Margin – and your initial goal is simply to have a margin, and be making more than you spend. As you delve a little deeper into Advertising on Amazon, your goal then becomes to increase that margin; and squeeze as much profit out of your investment as possible.

There are two ways to do this:

Reduce Your Spend

The first way to increase this margin is to reduce the amount you spend on advertising. The way to do that is to reduce the amount of clicks that don’t result in sales, and pay less for the clicks you do want.

This is where you have to analyze the data from your keywords and work out what’s costing you money without providing you with results. Take a look at these keywords, from the same campaign as the one I posted above. As you can see – these keywords ended up costing nearly $20 in advertising spend – but produced no sales whatsoever. 

The reasons for this are impossible to know for sure, but to my mind the keyword ‘mc romance’ and ‘a motorcycle club romance’ are so broad that people might see my advert, and be intrigued enough to click on it – but see from the blurb that it’s not really their sort of motorcycle club romance. 

Likewise, the author Harley Wylde produces books that are superficially similar to mine – but one read of my blurbs reveal that my books have a very different theme to hers. That’s fine – each to their own – but it reveals that I’m reaching an unresponsive audience by paying to use her as a keyword.

If you find you’re spending too much on keywords that don’t deliver sales, you can consider reducing your bid (I use dynamic bids, so mine are already super low) or even click the ‘Active’ button and shut them down completely.

Make More Sales

If you want to be making more profit, sell more books! But, if it was as easy as that, you wouldn’t be reading this article. We wrote another article recently which outlined how any advertising strategy needs to focus on those magical conversions – ‘converting’ the clicks that arrive on your book page into paying customers.

Whether that’s tweaking your keywords to reach a more suitable audience, or updating the blurb of your book, if you can help reduce the roadblocks that prevent people from buying your book, you’ll automatically increase your margins by simply bringing in more money.

But while issues with your blurb, reviews or anything else preventing people from buying your book are the subject of another blog post and aren’t always a quick fix, one thing you can try before getting to any of that is examining your keywords to identify the ones that do deliver results – and get more of them!

My three strongest-performing keywords were author names – Glenna Maynard, Scott Hildreth and Cassandra Robbins. A good strategy would be to go to the book pages of those authors and search for books that are popular with their readers; using their Also Bought section as a source of more keywords, which will hopefully also perform strongly for you.

The more keywords you add, and the more relevant they are to your intended audience, the more clicks you’ll receive and the more sales you’ll get.

In it for the Long Haul

Hopefully this explains why Amazon Advertising doesn’t deliver the instant hit that a newsletter promotion or even Facebook does – because it’s more of a slow-burn, background campaign that you hone, sharpen and tweak until – hopefully – you’ll manage to get it to the point where you consistently spend less on advertising then you do on sales.

That’s when the magic happens.

Because if you have a profitable ACOS on your Amazon campaign – you earn more money in sales profit than you spend advertising your books – you can then ‘scale it up’ by spending more money. You’ll constantly need to tweak and monitor your campaigns – ensuring they remain profitable, or you take any opportunities to increase your margins if you find them – but if you do so, you’ll slowly start to build the automatic, residual sales of your books in the background; giving you more and more of a result each and every day.

It’s slow, it’s complex, and it takes work – but the power of a successful Amazon campaign is that it can consistently amplify the visibility of all your books, and boost sales and your author rank in a scalable and cost-effective way.

Advertising on Amazon can be the tool that will nudge your publishing career into overdrive; but it won’t happen overnight, and you can’t just throw money at it and expect it to deliver. It takes work, courage, consistency and thought; but as one of the many tools in your marketing toolbox, it has the potential to be incredibly powerful.

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If you have questions about getting started with Advertising on Amazon, or need help tweaking your ads or generating keywords, Hidden Gems offers an hour-long 1-to-1 consultation call via Skype or Google Hangout with Ginger or another expert in book advertising. 

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