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ROI

Return on Investment (ROI) is the measurement of how much profit or loss results from an advertising investment. ScribeCount offers ROI report options for individual Books, Series, and Ads. The result is expressed as a percentage.
ROI involves two pieces of data:
  • One, the amount spent on the ad.
  • Two, the profit or loss that resulted.
Return on Investment = (profit / cost) x 100
To do this calculation correctly an Indie Author must first determine what their true profit is. This requires some math be done BEFORE the above formulas can be used. Each platform takes a cut of each sale, so we must first calculate how much money we get to keep from each sale. If we don’t adjust for this it will skew the calculation.
To determine the profit from each sale we use a simple formula:
(price – fees) x royalty rate = Authors Profit
Example: A book priced on Amazon at $2.99 gives the author a profit of $2.09 after Amazon takes its 30% cut. (They also take a delivery fee, which is variable for each book. For simplicity we’ll leave out the additional delivery fee in our example here.)
2.99 x 0.7 = 2.09. Books priced at $2.99 make a profit of $2.09 for every book sold.
Fortunately, there’s no need to do this math for every book in your library. ScribeCount does this math for you.
We now have the PROFIT number needed for the calculation; we only need to input the AMOUNT SPENT.
Amount Spent is easy to determine. How much did the ad cost? For our example we’ll use a social media ad priced at $16. (Some authors like to add on the time they spent creating the ad and the cost of producing it here. That is up to each individual author, for this example we’ll use the cost of the ad itself and nothing more.)

Using our fictional ad, we’ll place a book normally priced at $2.99 on sale for .99 cents.  (Amazon waives the delivery fee for .99 cent books, and the royalty is dropped to 30%.)

Profit = 0.99 x 0.3 = 0.29

A sale of this book would now produce a profit of $0.29. We’ll further assume that we sold 15 copies over what is normally sold and credit those sales to the ad. This brings the total profit up to $4.35.

The ROI for this ad is 27%  (ROI = (4.35 / 16) x 100 = 27%)
We now have an ROI percentage drawn from the data, but what does that percentage mean?

An ROI that is below 100% equals spending more money than was earned back. (Loss)
An ROI that is at 100% equates to breaking even on the advertisement.
An ROI that is above 100% equals making more money than was spent. (Profit)
With an ROI of 27% it appears our ad did very poorly.
Or did it?
What if that book was actually book one of a four-book series, and readers went on to buy and read the rest of the series? How do the numbers look then?
To know that we simply need to expand on our example with some Sell-Through data. We’ve already discounted Book One to $0.99. Let’s sell the next three books in the series for $2.99 each. The sell-through numbers look like this:

Book 2 = (70/81) = 86%
Book 3 = (65/81) = 80%
Book 4 = (60/81) = 74%

We’ll then need to multiply those numbers by the net profit we made on each of those books.

Book 1 = $0.29
Book 2 = $2.03 x 0.86 = $1.75
Book 3 = $2.03 x 0.80 = $1.62
Book 4 = $2.03 x 0.74 = $1.50

The final numbers add up to $5.16. So for every copy of Book 1 that we sold, we earn $5.16 overall thanks to readers finishing the series.
What does that do to our ROI? Let’s review:
  • We sold 15 copies more of Book One than we’d have sold normally.
  • We earned a total profit of $4.35 from the sales of Book One alone.
  • We paid $16 for the ad.
  • Our ROI was 27%

But now we’re taking into account our sell-through.

15 copies sold at $5.16 per book = $77.40. The ad cost us $16.

ROI = (77.40 / 16) x 100 = 483%

Our $16 ad initially appeared to lose money, but when combined with data from a Sell-Through report we found that it resulted in an excellent ROI of 483%!
Knowing the ROI for each advertisement provides a way to compare the results of different ads. If we were to run an ad on a second social media platform that costs $25, but resulted in an ROI of 88%, we would know that second ad was much less profitable. We would then pull the money from the non-performing ad and place it into the one that is performing.
ROI reporting combined with Sell-Through and Read-Through numbers can swiftly determine which ads are working and therefore provide the author with the maximum return for every advertising dollar spent. With this information readily available authors can perform ad-testing and find the best way to spend their advertising dollars.
ROI for Page Reads
Calculating ROI for advertising efforts aimed at books that are enrolled in Kindle Unlimited or Kobo Plus requires some assumptions. We’ll use Amazon for our example here.
Amazon does not provide the number of books borrowed. KU “pages” don’t correlate to any other page-count for your books. Books that are borrowed today are not necessarily read the same day. Outside of Amazon ads with affiliate codes, there are no tracking pixels or other means one can deploy to track what ads resulted in what KU borrows. As a result, all ROI calculations related to KU books should be taken with a large grain of salt.
That said, Amazon does supply some data that can be used to produce an educated guess.
KENPC. This stands for Kindle Edition Normalized Page Count and it is provided on the sales page of every book sold at Amazon. This is the number of “pages” that Amazon has determined your book to have. This number, when used along with the current page-read rate, can get us to that educated guess number.
If we’re in Kindle Unlimited, then we can also add in additional page reads.

For our example, let’s assume that the page reads for our advertised book are 500 pages higher than normal on the day the ad ran and then for the following three days.

The lifetime average KENP rate is 0.0045 cents for every page read. (See the KENP TRENDS data on this page).

0.0045 (KENP Rate) x 1500 (500 x 3 days) = $6

Our educated guess based off this limited data is that our book earned an additional $6 over the 3 days following the ad. If we add that to our existing ROI equation as part of the profit, we get the following:

ROI = (10.35 / 16) x 100 = 64%
So our combined sales and page-reads for those three days gives us that 64% answer.

Not over 100%, but significantly closer to earning back our $16 investment, and its only for three days. As long as the page-reads stay above normal they can be credited to that ad. So our ROI may climb into profit after a few more days of customers reading their way through the series.
What if I’m WIDE with my books? Do I have to do this for every platform?
No. ScribeCount does this for you. With the filters we provide you can run this report by various Date Ranges, Platforms and Formats, all with a simple click.
For further information on how to leverage this report into good marketing decisions visit our YouTube page, or check out the industry masterminds linked to here.
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