Once, while attending the Phocus Wright Travel Conference, I heard the CEO of the largest online-travel agency declare that it didn’t matter that a slew of new travel web sites with innovative products would pose a challenge to his site’s dominance. “We will simply outspend them,” he replied. “They won’t be able to compete.”
What he meant was that his company would be able to maintain its industry-leading position by “buying” users–in other words, spending enough on advertising to draw users to his site. The big three travel sites (Expedia, Travelocity, Orbitz) average approximately a 5% conversion rate. It simply becomes a math formula at that point. If the web site gets a million users, 50,000 of them are going to buy something.
As I prepare my manuscript for publication I have been thinking about what he had to say and did some “napkin” math.
Let’s start with a couple of assumptions.
**You are prepared to spend some money on advertising your book. Let’s say it’s a $1,000.
** Assume you have written a book that falls into the “chick lit genre” and that you want to advertise on a variety of sites (travel sites, blogs, fashion, entertainment).
**Assume that your average CPM rate is $8 per 1,000 ad impressions (which simply means that you get 1,000 text or graphic ads appearing on a variety of web sites for that $8). In short, you will be buying 125,000 ad impressions for your $1,000.
** Assume that 1% of those clicking on your ad will buy your book. That means you will have 1,250 purchases.
If you’re selling your book for $0.99 (a disturbing trend which I will write about later), then you’re probably going to break even–at first blush. But remember, reading is a lot like leisure travel: what you read (or where you vacation) is heavily influenced by others. So, let’s assume you wrote a good book, one that 60% of the readers like, and that 10% of them recommended it to their friends, who eventually bought it–and who then recommended it to their friends. As you can see, a positive referral cycle begins and you end up making a profit and getting the word out.
Now if you sold your book at $2.99, which means you keep $2.10, then you have immediately made a nice profit, plus you got the word out.
Of course all of this is merely hypothesis. You may not get a 1% conversion rate on your ads. Your readers may not recommend your book. You may not advertise on the right sites.
In any case, food for thought. Please do leave a comment. Oh, and by the way, I do not work for or own any piece of an advertising company. Just a guy typing away…