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November 25, 2019
By Mark Coker
How Amazon Advertising is harming indie authors

Amazon claims that Amazon Advertising helps indie authors find, attract, and engage with the site’s customers. Though this is somewhat true, what Amazon doesn’t tell authors is that this promised reach comes at a steep cost to them and their readers alike.

Amazon opened Amazon Advertising (originally branded Amazon Marketing Services) to indie authors in 2016. Authors can bid on keywords and search phrases under a pay-per-click auction model. The higher the bid on each click, the greater the odds that the author’s sponsored ad will appear in search results.

The top few slots in search results are the most coveted. The item in the first position typically attracts the most attention and clicks, followed by the item in second position, and so on. It’s not unusual in search marketing for the first three results to capture up to 80% or more of customer clicks.

Now let’s explore five reasons why Amazon Advertising is harming indie authors.

1. It’s a tax on earnings. By paying for visibility, authors are effectively subsiding Amazon’s cost. Each sale of an advertised book means more profit for Amazon and less profit margin for the author. And authors who advertise and also participate in Amazon’s Kindle Direct Publishing Select program and its Kindle Unlimited spawn are enabling Amazon to offer subscribers more hours of reading at less cost to Amazon.

" "Amazon Advertising tramples author brands. By using Amazon Advertising, authors are trampling the brand equity and platforms of other authors." "
2. Ad auctions reduce ROI. Ad auctions are a form of arbitrage, with advertisers bidding on search terms until the cost of that visibility exceeds the value of that visibility. This means that authors will bid up the cost of search terms to the point where a dollar invested in the click no longer returns at least a dollar in royalties. But such break-even points are difficult to predict in advance, which means that authors will invariably overshoot by bidding up keywords to the point that the ROI for each click goes negative.

3. Series starters inflate ad costs. Authors often view the first books in series as loss leaders. They’ll invest heavily to draw readers into first books in the hopes that the ad expense can be recouped later on, if and when readers purchase the next books in the series. This leads authors to over-invest in the cost per click of their series starters, which drives up the marketing expense for all authors— including those trying to market standalone titles. Hat tip to New York Times– bestselling author H.P. Mallory for drawing my attention to this fascinating dynamic.

Although experienced indie authors claim they already know the importance of this, the truth is that most authors fall short of their potential. Great cover design is so affordable that there’s simply no excuse for skimping. If an author writes a series, the covers should share a unified design theme, all the way down to the colors, typestyles, layout, and emotional feel. Whether an author writes series or standalones, there should be common design elements that run through every cover for every book—and the same goes for author websites, social media profiles, and all marketing communications. Such unified elements foster familiarity and make it easier for fans to recognize an author’s work.

3. Provide a consistent experience. What’s the emotional or intellectual experience that readers can expect from an author’s books, and does that experience align with the author’s brand identity? Consistency fosters familiarity, trust, and confidence. Think of Starbucks coffee. A customer can expect that a Starbucks pumpkin spice latte purchased in Dallas will taste the same as a Starbucks pumpkin spice latte purchased in Denver or Detroit.

4. Amazon Advertising tramples author brands. By using Amazon Advertising, authors are trampling the brand equity and platforms of other authors. To test this, just visit the Amazon homepage and enter a name into the search bar. For example, a search on Stephen King results in 24 rows of results. When I ran this this experiment in early November, the first three rows were sponsored ads for books from other authors, as were the last three rows, meaning that 25% of these search results were diverting readers away from their search for King. A similar test on Lee Child yielded seven sponsored rows, and fully 10 of the 26 cover images (38%) merchandised in the search results advertised books from other authors. In other words, Amazon is auctioning off every author’s brand equity to the next highest bidder. Often that bidder is an Amazon-exclusive title.

5. Sponsored ads confuse readers. Sponsored ads are a form of pollution that muddies the customer’s discovery experience. Sponsored ads are like walking into a bookstore and asking the bookseller for the latest release by a favorite author only to be told to read other authors instead. Not only does the bait and switch harm authors when their search results are diluted by other authors’ books but these search results confuse readers, too. They undermine readers’ confidence in the store’s search capabilities.

Amazon Advertising places indie authors in a difficult position. Should they pay to raise their visibility by plundering the platforms of fellow authors? Or should they accept less visibility by not participating? Neither option is good one.

Why would Amazon put in place a scheme that is so obviously detrimental to the interests of authors and customers? The answer is, because it can. Amazon is the dominant bookseller, with the power to set the tolls, taxes, and requirements for how authors will gain access to the world’s largest captive community of readers.

The story of Amazon Advertising serves as a stark reminder of why it’s imperative that authors forge closer relationships with their readers. If the retailer controls the customer relationship, then the retailer controls the author’s destiny. 

Mark Coker is the founder of Smashwords, and the host of the Smart Author podcast.