The Reality of Amazon KDP

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Welcome to another issue of Passionate Income.

Today we’ll be discussing the truth about publishing and selling books on Amazon. While a handful of gurus on social media position Amazon KDP as a “passive income” business, the truth is a little more complicated.

Let’s dive in.

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If you were to believe the gurus, Amazon KDP - aka self-publishing - is the easiest business model in the world. Because according to them, there are only three components to the business:

1. Identifying a high-demand, low competition niche

2. Outsourcing the book (ghostwriter + cover designer)

3. Running Amazon ads

And in theory, the above is true: Those really are the main three pieces involved in running an Amazon KDP business.

But when you dig a bit deeper, each of the above points are highly nuanced and present their own set of unique problems. And because of that, countless people invest thousands and thousands of dollars into guru courses / coaching programs despite never making one single sale.

So, in today’s post, we’ll break down the good, the bad and the ugly when it comes to selling books via Amazon KDP.

The Bad 😞

Generally speaking we’re pro-business, pro-capitalism and believe every person is responsible for their own success.

So we’ll start with the bad, but end this issue on a more positive note.

The first and most obvious downside of Amazon KDP is that the revenue screenshots you see gurus flashing on social media don’t tell the full picture.

Take the above example, which I found in seconds with a quick search on X.

This person is selling low-content books (journals, coloring books, etc.), all of which are paperback. With paperbacks, Amazon pays out a 60% royalty (meaning they take 40% for themselves).

So right off the bat, the nearly £10,000 generated above is automatically cut down to £6,000. Next, Amazon charges printing fees for paperback and hardback books. And those fees are taken out from your post-royalty earnings.

To illustrate, let’s say this person’s book costs £15, which leaves them with £9 before printing fees after Amazon’s 40% cut. If the fee to print the book is £4, the seller’s net earnings after Amazon’s fee and printing leaves just £2.*

*£15 - £9 - £4 = £2

But that’s not all.

Because to get eyeballs on your book, you need advertising. Which costs money.

Meaning, even if the seller’s Cost per Sale via advertising is £1, that means they net £1 in profit for every £15 in book sales!

And that my friends is the problem with Amazon KDP gurus:

They show you top line revenue without showing how much money actually ends up as disposable income (and the above doesn’t even take taxes into account).

Now, I want to be clear: There are millions of books on Amazon and the bestseller lists show some people are in fact making great money with KDP.

And a lot of that boils down to them getting the numbers above working in their favor (e.g. high book cost + low printing cost + low ad costs).

On the one hand, this simple 3-part formula is easy to understand.

In reality, however, actually achieving this formula is easier said than done. Here’s why.

The Ugly 😭

There are two factors that make it difficult to achieve the trifecta of High Book Price, Low Printing Costs + Low Ad Costs.

The first of which is competition.

In theory, the idea of finding a “high demand, low competition” niche sounds easy enough. Until you actually dive in and start searching.

At which point you realize everyone in the KDP space is using the same handful of tools to do research on the same handful of niches.

And because of that, ‘high demand, low competition’ niches are like diamonds in the rough. Because as soon as you find one, odds are 500 other people have found the same one.

Which is why it’s common to see people launch a book around your exact “secret gem” keyword while you’re still working to get yours ready.

Now, you might be saying to yourself:

“Ok, so selling paperback and hardback books sounds hard. But eBooks don’t involve printing, so wouldn’t you save money there?”

And the answer is “Yes,” except for one small problem: Kindle Unlimited.

As you may or may not know, Amazon has a program where you can pay $12 per month to access millions of titles (think of it like the Netflix of books).

Admittedly, big name authors like Stephen King, etc. avoid KU like the plague.

And they do so for good reason: On average, books in KU earn just $0.50 to $1 for every 100 pages read.

Meaning, if someone rents and reads your 200 page book, you get $1 to $2 in royalties. Which, as you can imagine, after advertising costs makes it near impossible to turn a profit.

On top of that, most self-published authors enroll their books in KU, putting your book at a competitive disadvantage if you leave it out.

Now, if you’re a famous author like JK Rowling, people won’t expect your book to be in KU. But if you’re a nobody, and the book buyer can get a similar book for “free” as part of their $12 / month subscription, it becomes much harder to sell your books for full price.

So when we consider how a) it’s difficult to find a truly ‘high demand, low competition’ niche, and b) most authors are making just $1 to $3 per sale before advertising costs, you can see why it’s so hard to succeed with KDP.

But there is hope.

The Good 😁

The good news about all of this is that some authors / self-publishers are obviously turning a profit with KDP. Because if they weren’t, you wouldn’t see self-published books being advertised or on bestseller lists.

So how they do it?

First, credibility goes a long way in today’s hyper-skeptical marketplace.

Meaning, with a high quality book cover and some reviews, your book will sell dramatically better than most people’s (given most people cheap out on their covers and don’t understand how to get reviews).

Second, you have to understand the concept of read-through.

While it’s true Kindle Unlimited is a royalties killer, from a marketing perspective, enrolling the first book in a series into KU works incredibly well as a Lead Magnet / Trip Wire.

The way this works is that you put one book in Kindle Unlimited to get people hooked on your content. But if they want your 2nd or 3rd or 4th book, they have to pay full price.

(Given most people are not fiction writers, 99% of what you see with Amazon KDP gurus involves non-fiction. But fiction writers use this same strategy).

Third, what experienced self-publishers understand is that advertising is a temporary solution to a long-term problem. See, similar to Google, your book can also rank “organically” on Amazon. And similar to Google, ranking for the right keywords can bring you tons and tons of sales.

The problem is, if you can’t get your book to rank well during the first 15 days, it can be near impossible to recover. So what veterans do is invest a bunch of money into their launch to pump up their organic rankings, then piggyback off the organic traffic they get for months and years after the fact.

The reason this is so massive is because if you can achieve high organic rankings, you can eliminate the costs involved in advertising.

Sure, doing so is easier said than done. But if your books ranks well for a high volume keyword, it can drive thousands of dollars in passive sales.

As an example, let’s say you normally making $5 in post-royalty profit but pay $3.50 in advertising to make one sale. In this case, you’re only making $1.50 in true net profit every time your books sells ($5.00 - $3.50 = $1.50).

But if you can rank well organically and eliminate that $3.50 in ad cost, you now get to take home that full $5 in profit. Which is 333% higher than what you were making when running ads.

At three sales per day, that’s $15 in net profit, totaling $450 per month.

You get 10 books making that much and you’re making more than the average American.

Last, ‘high demand, low competition’ is more of a scale than a binary Yes / No. As is the case with most business ventures, there’s a grey area where things are harder in some ways but easier in others.

Which in the case of Amazon, almost always boils down to how many competing books there are and how many reviews those books have.

So while you might not find a truly “perfect” niche, there are still some good ones out there. Especially when we consider how many so-called authors:

1. Write terrible books

2. Use horrible covers

3. Don’t understand ads or organic rankings

4. And are just looking to make a quick buck

So if you take a long-term approach, and are willing to build a real Author Brand, selling books via Amazon KDP can in fact be a great business model.

💡 Takeaway: On the one hand, achieving success with Amazon KDP is much harder than the gurus will have you believe. Especially in the context of take-home income relative to top line sales. But with the right strategy, it is in fact possible to earn a living selling books.

I'll leave you with this quote…

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