Why ACOS Doesn't Really MatterAug 09, 2022
Here in the UK, we're awaiting another mini heat-wave (by UK standards), so I'm enjoying these cooler mornings, writing these emails to you, in the garden, before the day really starts to heat up.
With such low margins on books, we do need to be careful of how much we are spending on Amazon Ads, particularly, how much we spend on individual keywords and ASINs we are testing.
If we were testing a keyword, for example, with an average CPC of $0.50, and we work on a typical conversion rate of 10% (1 sale in every 10 clicks), we'd need to spend $5 to make 1 sale.
If our book was priced at $3.99, we'd receive around $2.60 of that with the 70% royalty rate and a delivery fee of around $0.15.
So, at those numbers, we'd be "losing" $2.40 for every sale - and our ACOS would be horrible! But that doesn't bother us, not when we aren't purely focused on ACOS alone...
Here's the interesting thing...
If you have multiple books or a series, and you've paid $5 for a sale of Book 1, each additional book that reader purchases because of Book 1 (that they discovered and bought through the Amazon Ads), will increase their customer lifetime value (LTV) and soon claw back that initial "loss" on the sale of Book 1.
This is known as read-through or sell-through.
So, if you have 2 books priced at $3.99 each and a reader bought Book 1 through the Amazon Ads, then bought Book 2 through the link you had to it at the back of Book 1 or an email that Amazon sends them because they bought Book 1 (essentially, an organic sale), you would have spent $5 (for that initial sale of Book 1), but made 2 sales earning royalties of $2.60 per sale (assuming delivery fee is the same), meaning total royalties of $5.20.
Leaving $0.20 in profit. Not much, but...
Multiply that up by a longer series (or multiple series or multiple stand alone books) plus lots of sales of Book 1, plus Kindle Unlimited Page Reads, plus the bestsellers rank improvement from each sale and borrow and therefore an increase in organic sales and borrows...
You can soon see that making a supposed "loss" on the sale of Book 1 isn't actually a bad thing at all.
If you write non-fiction books and have products or services for sale on the back end, you can easily claw back any "loss" you make on the Ads by building your email list, nurturing the folks who join your list, and over time, introducing them to your products or services that a percentage of them will invest in.
Yes, ACOS has its place, but, as I mention multiple times per week, always look at the big picture. Don't look at Amazon Ads inside of a vacuum.
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