SSA #043: Why ROI Is Bad For Your Business

Read Time: 4.5 Minutes 

There are three little letters that many authors, including myself in the past, have been completely and utterly obsessed with:

ROI

Which stands for Return on Investment.

And I can understand why it's something every author wants – it means you're earning more than you're spending.

On top of this, if you don't get a return on your investment, then you, quite frankly, don't have a business; you have a hobby.

So what is my argument in today's newsletter all about? Why am I saying ROI is bad for your author business?

In short, ROI is a very dangerous way to make important decisions in your business.

Plus, I'll show you how to use ROI effectively, in a way that doesn't stunt your growth – it just needs one tiny little tweak.

Change The Timeframe

When it comes to paid advertising, and Facebook Ads particularly, if you're spending $50 per day, and only earning $30 per day in Amazon Royalties, then the words "Facebook Ads don't work for my books" will likely be going through your head.

But in this scenario, you're looking at data on a day-by-day basis, which is exactly how I looked at things in the beginning.

Look at this data over an extended period of time, however, and things could (and most likely will) tell a very different story.

After a couple of years of running Facebook Ads, I was a little older, a little wiser (and a little greyer – thanks kids)...

I also knew a little more about data and how to analyze it.

So, nowadays, when I sit down to look at the numbers each week and each month, I'm no longer looking so closely at the day-to-day, even the week-to-week.

Instead, I'm looking at things over a 30-60 day timeframe.

Sure, I pay attention to the day-to-day, week-to-week, but I'm not making important, critical business decisions on that data.

It's just not a long enough timeframe to allow for read-through of the books.

And we just have 1 complete series, plus Book 1 of a new series currently published.

If you have 2+ series', ask yourself how long it takes a reader, on average, to read all your books. And how many readers actually devour your entire catalogue?

If it takes a reader, on average, 2 months to read your entire collection of books, making critical business decisions (such as declaring "Facebook Ads don't work") based on 1 to 4 weeks of data could be catastrophic.

Analyze All Your Revenue Streams

If you have multiple streams of revenue from your books, and you're not tracking them all, you could be doing yourself (and your Facebook Ads) a disservice.

Let's say you earn revenue from:

– Kindle

– Kindle Unlimited

– KDP Print Books

– Audiobooks

– Ingram Spark

– Direct Sales

– Foreign Rights

If you're only driving traffic from your Facebook Ads to your book(s) on Amazon, and that's the only revenue you're tracking, you're missing out on a huge piece of the puzzle.

As an example, many readers will see a book advertised on Facebook, and then go to their local library to borrow it – these books come from Ingram Spark.

Likewise with Foreign Rights, if a reader sees your book on Facebook, but notices that it's the English version, they may go to their local library or bookshop to order it in their native language (assuming it's been translated into that language).

None of these sales in the two scenarios above would be attributable back to the Facebook Ads with data, but the Facebook Ads were nevertheless responsible for those sales.

This is why tracking ALL your revenue streams on a monthly basis is absolutely critical.

It's also why I bang on a lot about the big picture.

Looking at your Facebook Ads and Amazon Royalties in a vacuum will throttle your results and hold you back from making insurmountable progress in your author business.

An Example – Our Direct Sales

My wife and I are just over 6 months into our direct sales journey, but only 2 weeks into selling the eBooks directly (as we removed the eBooks from Kindle Unlimited recently).

It's VERY difficult to watch our Amazon royalties dropping like a stone, and our Amazon Bestseller Ranks falling off a cliff, but we're going all-in on direct sales, so we've stopped all Facebook Ads spend going to Amazon and putting it all towards the direct sales instead.

I'd be lying if I said we hadn't been tempted to put the books back into Kindle Unlimited, but 2 weeks of eBook direct sales (as they are the biggest sellers) is nothing; it's less than the blink of an eye.

There's no way we can say for certain that direct sales don't work with 2 weeks' worth of data. The timeframe is just way too short.

We're making consistent sales every day, we're building an audience, we're learning something new every day, I've invested in an eCommerce coach, and things are really starting to move. It's slow, yes, much slower than Amazon, but the potential upside is huge – and incredibly exciting.

We have so many plans for this store that we're gradually beginning to implement, and the persistence and consistency is gradually starting to pay off.

If I was looking at the ROI of our direct sales, I'd pull the plug today. But I'm not looking at ROI. At all. This is an investment into our future. ROI will be something I start to measure in 6-12 months' time.

The Moral of The Story

When I really thought about this dilemma, I came to the conclusion that I was actually being quite arrogant, expecting to see a positive ROI on something brand new to me that I had no experience in.

I came across a great article recently about ROI, and their solution to this mindset block, which is what I believe it to be, was to switch from thinking in terms of ROI, to instead thinking in terms of R&D – Research and Development.

This is similar to how I have seen Facebook Ads for some time now; I see it as an investment, not an expense.

I think we are all guilty at some time in our lives, of pulling the plug on something too early, because it wasn't providing us with an immediate ROI.

We live in an instant gratification world, and if we don't get what we want immediately, something is broken, and it's time to move to the next shiny object.

That is, unfortunately, how Facebook Ads are viewed by a lot of advertisers.

Just because Facebook Ads can generate a lot of sales, and we see other authors experiencing incredible results from them, we think that if we don't get immediate sales from Facebook Ads, "they don't work".

They do work; they just need time.

Wrapping Up...

If you can switch from thinking about ROI to instead thinking about R&D, and give yourself more time to measure the effectiveness of a new initiative, such as Facebook Ads, you will see far superior results – and you won't pull the plug too early.

So, a new term for you to consider using instead of ROI is ROIT – Return on Investment over an extended TIME FRAME.

Looking at something over 14 days is going to tell a drastically different story than looking at that same something over a 60-day timeframe.

That's it for this week; thanks for reading. See you next Saturday.

To Your Success
– Matt