Author Services Guide: Using Amazon’s AMS Platform Effectively

This week, I’ve talked a lot about Amazon’s AMS platform, first announcing the system and my hopes for it, as well as ranting about some of the more idiotic elements of their creative guidelines. Today, I’m going to go into some nitty gritty detail about how to take advantage of the AMS platform.

Marketing sucks. Many authors break out into a cold sweat at the thought of trying to promote their work. Spending money on advertising is scary business. Many authors stubbornly decide organic advertising (things not paid for, which grow naturally) is the only way to go about it. There is a lot of potential in pursuing paid advertisements, if you understand how to mitigate risk and maximize performance.

I know those pretty catch phrases annoy a lot of people, but that’s the name of the advertising game. The idea is to mitigate your risks–or control your expenditure to ensure you’re not throwing away your hard-earned cash–while also ensuring you’re getting the best bang for your buck. It’s not easy. It’s also absolutely impossible to guarantee the performance of an advertising campaign.

To begin, I’m going to explain the differences between the two different services AMS currently offers advertisers: Product Targeting and Interest Targeting.

Interest targeting is the easiest advertising option for authors. You select a category you want and Amazon will serve ads to those who are browsing products in that category. It’s very broad, giving authors a higher chance of getting impressions. (Impressions are ad views.)

However, it’s a broad category. Science Fiction and Fantasy can cover a lot of territory, and your specific book won’t appeal to every Sci Fi and Fantasy fan.

But, this form of advertising is the easiest. All you need to do is set a cost per click value and run the campaign. Set up is easy, as is basic management. In an interest-based advertising campaign, there are only a few figures you will need to know to be able to manage your campaign.

Please bear with me, as there is some math involved–don’t worry, though. It’s very basic math. If you can add, subtract, divide, and work with percentages, you have all of the knowledge you need to make sense of the numbers.

Impressions and number of clicks meld to become your click through rate–or the percentage of clicks versus impressions. Your mileage will vary, but don’t be surprised if your click through rate is below one percent. This is normal. In a cost per click campaign, you’re less worried about your click through rate as you are your return on investment. This is how many people buy your product after clicking on your advertisement. This buy rate is your major concern–and what we’re gunning for with this ad campaign.

So, how can you tell if you’re getting a good return on investment? It’s a number game. There are three figures you need for this: Your total number of sales, your total number of clicks, and your cost per click. Here’s the basic math:

Note: These are hypothetical figures, as I do not currently have sales figures. (The AMS system is simply too new.)

Step One: Calculating Number of Clicks per Sale (Click to Sale Ratio, AKA Conversion Rate)

Clicks divided by Sales = Number of Clicks per Sale.

Example: 115 users clicked on my ad; 10 users bought the book.

115 / 10 = 11.5.

Step Two: Calculating Investment

Click to Sale Ratio multipled by Cost Per Click.

Example: 115 users clicked on my ad; 10 users bought the book. I paid $0.15 per click.

11.5 * $0.15 = $1.725

Step Three: Calculating Return on Investment

For the purposes of this example, my royalty per sale is $2.15. I paid $1.725 per sale in my ad campaign.

$2.15 – $1.725 = $0.425 (Actual Return on Investment)

$0.425 / $2.15 = .19767 (ROI Percentage, AKA 20%)

Step Four: Understanding the Results

In this scenario, my return on investment is $0.425, which is a 20% profit margin. 20% is not a high margin. That said, it is a profit. Any time you come out with a positive return on investment, you’re a winner. You’ve gained more sales than you’ve spent money. This is the name of the advertising game.

While a lot of analysts are likely rolling in their graves at this simplified version of data management, this post isn’t designed to make you a statistics expert.

It’s here to teach you the basics. In an interest-based ad campaign, such as the one Amazon AMS allows you to do, this is the information you really need to focus on.

Now that you’ve had a crash course in Marketing 101 for cost per click campaigns, we’re going to go kamikaze and take a look at product-based advertisement. Product-based advertising, in theory, should have a lower impression count but a higher click through rate and conversion rate. Conversion rate, by the way, is the rate clicks become buys.

You want a very, very high conversion rate–ideally 100%, though that’s not going to happen.

While interest-based campaigns take out a lot of the work, product-based advertisement offers a lot more in terms of interested users. Here’s an example of my active product-based campaign. This shows some of the products I’m specific targeting for my Storm Without End campaign.

If you click the image, you can get a closer look at the types of products I chose. In short, I picked titles I thought were similar to my own–I also picked similar merchandise. This is taking interest-based advertising to the next level. By picking and choosing products that I feel are in line with what my novel is about, I have a higher chance of gaining interest from shoppers. I want these shoppers seeing my title and becoming familiar with my name as a brand.

It’s important to point out at this is less than a full day into the Storm Without End campaign. These numbers are, for all intents and purposes, useless. Once I have viable numbers–and enough of them to be worth looking at–I will continue this author services series discussing the pros and cons of Amazon’s AMS system.

For now, I want to bring your attention back to the branding comment I made above.

Branding, or the process of creating security and familiarity in a customer, is critical; as someone sees a product often, a sense of trust is developed–regardless of whether or not they’ve used/read the product. That’s why branding advertising is so important. It brings a sense of trust and familiarity, whether it is deserved or not. It’s a human mentality thing–if you see something frequently, it must be good or safe. It’s a security in numbers, and unfortunately, a sheeple thing.

In a way, it’s sleasy, and a lot of marketers take advantage of that. It’s an unfortunate part of the game–a part I don’t like. But, it works. If it didn’t work, advertisers wouldn’t spend so much money on these types of campaigns.

In case you hadn’t noticed, I do not have stats for individual products. This is enough to drive me up a freaking wall, three times over. I can’t tell if a specific product is performing better than another.

So, like interest-based promotion on AMS, I have to rely on averages to know if this form of campaign is working. That’s a terrible way to do it, but that’s all I have to work with at this point. Amazon’s AMS system has embraced ‘Keep it Simple, Stupid’–which works, to a point. Ultimately, it means that I will have losing products and winning products, but I will target my costs per click to the overall picture.

Easier for authors to manage in the large picture, and it has the benefit of removing the time sink that is adjusting a cost per click campaign per product or keyword.

The math is the exact same for the interest-based campaigns. Ratio of Clicks multiplied by the cost per click is your average investment, with your royalty figures serving as the basis for your profit margin, or return on investment.

That’s AMS in a nutshell–a very simplistic nutshell. Can it prove a good tool for authors?

Only time will tell.

But no matter what your decision is, when you’re advertising your book, your return on investment is king. Your goal is to always have a positive return on investment. That means you’re making money instead of losing money.

With paid advertisements, you are always at risk of losing money. That’s the name of the game, so author beware–and be aware. You can save yourself a lot of heartache and headache if you watch your advertising campaigns careful. Always take the time to do the math. If you’re bleeding money while advertising, you’re not doing it right. Close the wound and find something that works.

At the same time, I think it’s important that all authors realize that taking the risk of advertisements might be well worth it. Paid advertising can open doors that organic growth simply can never reach. The trick is knowing when to hold ‘em and when to fold ‘em.