By Michael Evans on June 18, 2023.
Craig Martelle is always on top of it. And this month he shared with us that the KU page read rate is down to $0.004. A historical low for this time of year.
If you have been following Joe Solari’s tremendous work, you will know that accounting for inflation since 2015, the real earning power of page reads today is much closer to $0.003 per page read.
That represents a 40% drop in spending power for the average KU author.
Or viewed another way, if you aren’t getting 40% more page reads (and this doesn’t even count for higher ad costs) than in 2015, you are likely earning less today.
This is frustrating. It’s sad. And it affects the personal incomes of so many of us.
There are now renewed calls for going wide and others shaming KU authors for putting all their eggs in the Amazon basket.
This debate is old, this debate is tired, and this debate is wrong.
We shouldn’t be shaming KU authors. And as much as we can demand Amazon to raise the page read rate, this isn’t the silver bullet either.
I want to share with you the culmination of my experience helping hundreds of fiction authors make hundreds of thousands per year diversifying and expanding their revenue streams.
Many of these fiction authors are in KU.
And as we will discover… being wide still exposes your publishing business to many of the same risks of being in KU.
What follows will likely change how you think about the indie publishing industry and your relationship as an author with platforms and retailers.
And I’m hopeful that by the end of this, whether you are KU, wide, hybrid, on serial fiction platforms, or just beginning your publishing journey, you will have insights that will help you make more money as an author and take greater control of your publishing business.
First, before dissecting the roles of retailers and platforms in our life, we have to analyze what drives success in our publishing business.
Luckily, every business on earth follows similar principles, and one simple equation can sum up the long-term health of our publishing business.
It’s called the CAC to LTV ratio.
Or customer acquisition cost to lifetime value.
The lower your CAC (customer acquisition cost) and the higher your LTV, the more profitable your publishing business will be.
Theoretically, a near-zero CAC and near-infinite LTV would lead to your business making infinite money (spending nearly nothing to make unlimited cash).
These kinds of businesses don’t exist.
The truth is that your customer acquisition cost and subsequent customer lifetime value vary widely and shouldn’t be viewed as a monolith.
This is where the platforms come in.
There are two kinds of platforms:
- Discovery platforms. i.e. Amazon, Facebook, Bookbub, etc.
- Community + Direct-Sales platforms. i.e. Subscription platforms, crowdfunding platforms, sales on your own site, building third-party businesses such as reader conventions/experiences etc.
In some cases, there are blurred lines where some platforms that provide discovery also offer elements of direct-sales platforms and vice versa.
However, we will not be going into the nuances of each platform and tool you have available to you as an author today.
Instead, we will be focused on the big picture… how can we foster healthy, sustainable relationships with platforms (effectively business partners) to create as profitable a publishing business as possible?
Now we have to return to CAC. Or Customer Acquisition Cost.
Most often, we measure CAC depending on the customer acquisition channel that we are utilizing.
Every discovery platform you utilize is a separate customer acquisition channel. And in fact, to get really granular, most discovery platforms, have multiple acquisition channels within each (newsfeed on Facebook through paid ads versus organic reach of content on FB. Or also bought on Amazon versus Sponsored Products).
There is no such thing as being able to acquire customers for free.
Everything we do costs time or money or both (and time is money!).
Different customer acquisition channels will have different costs associated with them. But before we go any further here we have to look at the other side of this equation… Lifetime Value.
This is the bread and butter of publishing.
Who cares if you can acquire a customer for just 1 penny if you only make 0.0001 pennies back? That’s not a great return on investment (that’s actually losing money).
In addition, this ratio of CAC to Lifetime Value has an important driver that fuels the cash flow for your business…
This is called the payback period. This is how long it takes to recoup one’s CAC after your initial investment.
Case in point. If you had a 1 to 2 CAC to LTV ratio but a 1 month payback time (this means that for every dollar you spend acquiring a customer they will be worth $2 to you over the course of their lifetime)… you can get that machine to generate you lots of money really quickly by investing into successive rounds.
Likewise, if that payback time is closer to 2-3 years, it will be much tougher to invest in successive rounds and thus spin the flywheel of your publishing business forward faster.
I know this is getting nuts… but I promise we are getting to the big point.
We have 3 metrics that matter here.
Your customer acquisition cost: aka how much it costs to garner a new reader.
Your lifetime value: aka how much money you make from a reader during their lifetime as a customer of yours.
Your payback period: aka how long it takes for you to recoup your initial investment in CAC and start profiting from your relationship with a customer.
Now here are 3 principles to keep in mind regarding how these metrics are interrelated with one another in the context of publishing:
*Note all of this is more art than science, which is what makes this fun to navigate for us creatives.
- Not all customer acquisition channels are created equal. Some channels lead to a MUCH higher lifetime value per reader (or average revenue per reader). And other channels have a much higher total addressable market. This means that there are more readers that exist in that channel for you to target.
- For every customer acquisition channel you utilize, there will be a local maximum where your CAC to LTV ratio is most profitable. For instance, you may have 1 million target readers on Facebook in your subgenre. However, acquiring all of them would take an unbelievable amount of money because you’d have to convince everyone in your target market to read your book. There is likely an optimum spend (in terms of time and money) on each customer acquisition channel to maximize your profit. We all see this when we see ad costs go up or an inability to break through to a higher ceiling in specific subgenres’ also boughts on Amazon.
- The best way to drive a higher LTV is by acquiring the right readers. These are readers with a high degree of willingness to pay for your services, content, experiences and readers that have high retention (we most commonly refer to this as read-through in the publishing world). The right readers are a combination of utilizing the best acquisition strategy on the best acquisition channel(s) for your target market while also having the best reader journey that quickly develops trust in your reader and keeps them coming back for more stories.
And one last bonus and super important dirty truth before we finally get to the platforms?
Publishing is a network effects business, with the top nodes driving the lionshare of the revenue and the profit. There is an outsized advantage to dominating a particular customer acquisition channel because converse to the normal laws of many other markets, customer acquisition costs tend to go down for the players at the top of the market… not up.
We all know how this is with algorithms amplifying existing reader behavior
Joe Solari goes into immense detail on this topic on many occasions so I won’t cover that further here.
So what does this mean for you?
And what does this mean with your relationship with platforms if we are going to take this framework and make it the foundation for how we approach our publishing business?
Discovery platforms are customer acquisition channels. And some of these customer acquisition channels even will pay YOU.
That’s kind of incredible, but it’s also scary.
Because if we pretend that we are running OUR business on a discovery platform, we are sorely mistaken.
On discovery platforms you have limited monetization methods (if any at all… i.e. many serial fiction platforms and content platforms like Facebook), and limited control over your pricing and product offerings (standardized consumer experience and pricing makes them optimized for discovery).
Since these discovery platforms have their mission of making readers THEIR customers, they can exert enormous leverage.
This goes both ways.
These platforms promise you an influx of new readers, sometimes an unbelievably massive influx of new readers if you can become one of the top players in the charts.
In return, these platforms take from you a higher revenue share, control over the reader experience and pricing, limited monetization options, and discovery that can get throttled at any time… because as we know CACs are constantly changing on every platform (sometimes for better and sometimes for worse).
On top of this, they also control your payback period (oftentimes artificially extending this period by holding your money longer).
And they artificially decrease and cap the Lifetime Value of your customer (i.e. with per-page read payouts that quite literally cap how much you can make per reader in the program).
Are any of these bad things?
Not necessarily. I wish the discovery platforms treated us better as authors. And as there is more competition (as we see with YouTube and TikTok right now) there is an incentive for the discovery platforms to give more to creators.
But at the end of the day, on a discovery platform, your readers are not your customers. You don’t get their emails and other key customer data. It’s rented land.
Rented land has its benefits. And the discovery platform you choose to utilize?
Well that depends on your genre, your stage of career, and the specific product line you are looking to drive new customers into.
Some subgenres perform tremendously well in KU and when amplified by the algorithmic effects at the top of the store, it can become a deleterious decision for authors NOT to be in KU. Other genres have a sizable audience wide, on serial fiction platforms, or in other avenues such as Trad Publishing that make other routes more viable.
The key here is that each customer acquisition channel is product line dependent and dependent on your prior usage of that channel. Where is there the biggest group of untargeted readers in your target audience that you can begin capturing using a discovery platform?
Notice how I’m bucketing both KU and Wide together.
That’s because outside of exclusivity to the KU program for your eBooks (or audio for Audible), these platforms have very similar dynamics (in fact many serial fiction platforms demand exclusivity in often predatory contracts).
In all of these exclusivity agreements, there is one core promise. Greater discovery. Lower CAC. More readers!
When used right, these agreements can be valuable.
Just look at what some of the top podcasters in the world do. Spotify signs exclusive deals with podcasters all the time as do top streaming platforms like Twitch and YouTube with their creators.
So once again, depending on the stage of your career and your specific product lines certain discovery platforms might make more sense to utilize at different times than others. And for many others, KU is still a top choice, and rightfully so.
The problem is that the conversation stops there.
We obsess over acquiring new readers and don’t focus enough on the core principle of subscription marketing… marketing to your existing fans.
Walt Disney was famed for saying that he’d do anything to make someone leave happy from Disney World because the cost of getting a new fan to come to the park was SO much higher than keeping an existing fan coming back.
As authors, we need to focus more on building our own amusement parks.
Why?
By utilizing direct-sales + community focused platforms and tools we not only diversify our revenue streams but EXPAND them by increasing the Lifetime Value of our readers.
We can do this by providing additional value to existing fans to immerse them further into our fictional worlds and stories.
And by funneling a reader from a discovery platform to a direct-sales and community-focused platform we can capture core customer data such as one’s emails… this data makes it easier to continue marketing to our existing fans and increase the Lifetime Value and ultimately profit of our business.
And we also have a faster payback period due to funds being paid out oftentimes in days and weeks rather than months.
Higher LTV + faster payback period = more profit for your publishing business.
The key to all of this: different discovery platforms have different CACs, but also have different Lifetime Values for the average reader on those platforms. For some KU may have a low CAC, but if it also has a low conversion rate to products and revenue streams that draw a higher lifetime value for your readers, then it may be less profitable as a customer acquisition channel than other options.
The trick here is that you can still extend the Lifetime Value of KU readers beyond the KU program itself by utilizing memberships, crowdfunding, and other community + direct-sales platforms that don’t cannibalize your KU income.
The beauty of all of this?
This is an AND situation.
It’s not about abandoning the platforms. And it’s not about membership, crowdfunding, or other product lines cannibalizing your retailer sales or visibility on discovery platforms.
It’s about building a system that takes a reader on a discovery platform and with the power of your story makes them a superfan of your work, and then realizing a much higher Lifetime Value from the true fans of your work by offering them more value.
Most commonly these come in the forms of early access to new stories before they are released elsewhere, bonus content, merchandise, fan experience such as exclusive livestreams with you, signed books and book boxes, travel guides based on your books… the list of opportunity and experiences you can provide your fans is limitless.
And just like musicians make their BIG money from concerts, places that bring their superfans together to enjoy a very connected yet more intimate experience with their work, we can do the same thing as authors.
We must.
If you can take even 2 – 5% of your readers in KU and increase their Lifetime Value by 5x to 10x by utilizing a membership or crowdfunding model, you can increase your existing income by 20%+ (and often times we see even more than this).
You get greater control. Greater revenue and profit. And better experiences for your readers.
All without giving up the existing discovery and revenue channels you are utilizing.
But I know what you’re thinking… my books are exclusive to KU, how can I possibly do anything like this? I have indexed 500 fiction authors who are succeeding in subscriptions and dozens of them are in KU with Aven Ellis, Shirtaloon, and Nikki St. Crowe just to name a few of them.
Publishing is changing.
It’s no longer about KU v.s. Wide.
It’s about the Attention Economy v.s. the Creator Economy.
Utilize these attention economy/discovery platforms for what they are worth. Acquire new readers.
But remember that you have three levers to pull to grow your publishing business.
- Acquire more readers.
- Have your readers pay you more (aka increase the LTV).
- Increase your payback period (aka get paid faster).
We all know the vicious cycle. Raising prices on discovery platforms hurts our ability to acquire new readers. Thus we lower our prices, suppressing our LTV as CACs continue to rise across the board in the industry. This ultimately hurts our profit and damages our ability to increase it.
There’s a solution.
There’s a way to win in the future of publishing.
And it’s about building YOUR own platform as an author utilizing a direct-selling/community based platform or monetization tool. AND making use of the discovery platforms.
It’s been so cool to see the success of the authors taking on this new mindset and approach, and I hope this inspires you to look at your publishing business a bit differently, and take action to join the wave of the Creator Economy that is altering our industry day by day.
You might be thinking to yourself… how can I build my own platform? How is this even possible?
Well, there’s been a Cambrian explosion of technology to help creators and soloprenuers do just that.
And your readers, your true fans who keep coming back story after story… they are there for you. They are hooked to your stories, your worlds… and ultimately… no matter how much leverage discovery platforms and publishers and retailers try to exert over us… we are the ones with the power.
That’s why we like to say Storytellers Rule the World.
It’s time to build our world for ourselves and our readers.
Let’s stop debating. Let’s stop fighting.
And let’s start working together. Our readers need us.
And together as storytellers, we are truly boundless.