Why CPM Advertising is for Suckers who cannot do Math
By Charles Moffat - March 2021.
For the purposes of this article I am going to be using Bookbub as the example. Bookbub is a company which provides a variety of different methods for publishers and independent authors to advertise their books in an effort to get more sales. One of the methods they offer is CPM advertising on their website.
Now herein lies the problem.
The type of people who visit Bookbub's website are publishers and writers, and to a lesser extent readers who are there to browse. So there are readers visiting the website, but the amount of traffic the website gets that is from readers is "questionable".
The CPM advertising on Bookbub's website costs $7 per 1000 views.
In other words the author or publisher is paying to advertise their book on the Bookbub website, and then they are paying 0.7 cents per view.
Just views. Not clicks. There is no guarantee that people will click on the advertising.
So let's do some math and let's say that some people do click on the advertising. 20 people out of 1000, which is actually very generous because that is a 2% clickthru rate and most websites don't get such clickthru rates any more. Most websites these days have a clickthru rate of 1% or less, but because we're being generous let's pretend that Bookbub's clickthru is roughly double what normal websites get.
So 20 people click on the ad.
How many people buy the book?
Again, no guarantee, but let's pretend 5 people clicked on the book. That is an extremely generous number to say that 25% of the people who clicked on the ad actually buy the book. Especially if it is a brand new book with zero reviews. Highly unlikely, but we're being very generous with the numbers.
If it is an Amazon ebook the going price will be between $0.99 and $9.99. If the ebook is priced at $0.99 or $1.99 then the author/publisher only gets 35% of the sale price ($0.35 for a $0.99 ebook or $0.70 for a $1.99 ebook). If the ebook is $2.99 or higher then the author gets 70% of the sale price, minus a delivery fee which is usually about 10 cents (varies on the size of ebook file). So the author makes about $1.90 to $6.90 per sale.
Now let's imagine you spent $7 on CPM advertising and you got 5 sales. Well...
For a $0.99 ebook you just made $1.75. You lost $5.25 from your investment.
For a $1.99 ebook you just made $3.50. You lost $3.50 from your investment.
For a $2.99 ebook you just made $9.50. You gained $2.50 from your investment.
Basically what this means is that in order to have a chance of turning a profit you need to be selling your books for a higher price. The peanut prices you get for anything less than $2.99 means the financial risk is very steep. You get the best return on your investment if your ebook is priced at $9.99.
For a $9.99 ebook you just made $34.50. You gained $27.50 from your investment.
Which sounds great on paper.
But remember this is all hypothetical and based on best case scenario "generous" numbers.
For the next part let's use a ratio that is half of the previous one. A 1% clickthru rate. Only 10 people click the ad. Furthermore let's assume that only 12.5% of the people who click actually buy a book...
So 1 person out of 10 bought the book. You just made $6.90 from your $7 investment, and ultimately lost $0.10.
But let us also pretend you are doing a much bigger budget. Not $7. Let's spend $700.
So you spend $700 and you get 125 people to buy your book (thanks to the 12.5% purchase rate from the 1000 people who clicked the ad). You made $862.50 off your investment, leading to a profit of $162.50.
But you will notice that this profit margin only works if the ebook price is $9.99 and you are making $6.90 per sale.
If you drop the ebook price to $7.99 you make $5.49 per sale. If you sell 125 copies then you made $686.25. So you've lost $13.75.
Do you see what I am getting at?
The profit margins are so tight that selling ebooks in this manner really only works if the book's sale price is $8.99 or higher, and let's face it, most ebooks don't command such a high price unless the author is already successful.
And we haven't even talked about the worst case scenario.
The author spends money on advertising and gets zero sales.
Coupled with the fact that CPM advertising is usually in the form of rotating random banner advertising, and this means CPM doesn't add any SEO value either. So the author is getting zero SEO value, is paying for views (not clicks), and there is no guarantee they make a single sale.
The math really only works for successful authors who can sell their books for $8.99 or more. For anyone who is selling short stories or novellas (which will typically be priced at $0.99 to $5.99) then CPM advertising makes zero sense for them.
Hence the title up above: Why CPM Advertising is for Suckers who cannot do Math.
And this is just one example of one website which offers CPM advertising for $7 per 1000 views. There are other websites out there demanding $8, $9, $10+ for their advertising, and they all have the same problems: Low clickthru rates, no guarantee that people will make a purchase.
See also: How to Market your Books on Twitter
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