Bam! Amazon earnings down over 34%.
Overnight.
With just one email.
There were of rumors about changes to the Amazon Associates Commission Structure for weeks. I found out in my mastermind group initially, and it was clear that some affiliates were going to have major changes.
Typically, these affiliates were hitting the 8.5% commission rate and making tens of thousands per month on a consistent basis. I wasn’t convinced that the commissions were changing for everyone, but now it’s clearly changing on March 1. Amazon was reaching out to the affiliates that were moving a lot of product to give them the news early.
This post covers:
- The New Fixed Standard Program Fee Rates
- The Old Volume Based Rates
- Reactions
- Examples of the Impact For Two Actual Sites
- How to Find the Impact for Your Sites (Video)
- What You Can Do If You Are Impacted
**Don’t forget to sign up for the webinar.
Amazon Associates (New) Fixed Standard Program Fee Rates
Here is the new Fixed Standard Program Fee Rates (opens in a new tab):
*Amazon Associates Program Operating Agreement effective on March 1, 2017
They state on the same Update Page that:
• We have revised the Fixed Standard Program Fee Rates (see below), removed the Variable Standard Program Fee Rates and removed caps on PC earnings.
The Old Volume Based Rates
The old rates were variable based on the volume of sales:
This has major implications for most established affiliates!
Some good, mostly bad.
Be sure to sign up for the no-pitch webinar to go ever the examples with real data.
Additionally, this impacts the value of websites in a very big way. There is a whole ecosystem of website brokers out there, like Empire Flippers and FE International, that sell all sorts of businesses. Amazon Affiliate Niche Sites are a big part of them. (Check out how to build an Amazon Affiliate website)
Reactions
There are 3 main camps that I’ve seen:
- People with established niche sites that make money with Amazon Associates right now. I fall into this camp and it’s a series impact for me. I ran the numbers for last year and if I apply the Fixed Standard Program Fee Rates to 2016 sales, it’s a DROP of 34%. Ouch. Some people are panicking and others are calmer. I’m calm, but always knew about the risk of not controlling two critical components of the Affiliate Entrepreneur model: The SEO Traffic and the Affiliate Program. Google and Amazon, respectively, own those components and I have to play within the rules.
- People that don’t make money with Amazon Associates, yet. Most people in this camp are positive for the most part. They aren’t taking a pay cut and aren’t impacted in a direct way so many of them still see the Amazon Associates program as the best and fastest way to make money online. I agree with that sentiment. They can hypothetically imagine the people making $10,000 per month, and if that’s reduced by 34%, it’s still $6,600 per month. $6,600 is still a great deal of money. Here is some activity in a Facebook group dealing with niche sites and making money online.
- Businesses that support the Amazon Associates ecosystem in some way. Most of the time these business are well diversified so the change represents a minor reduction in revenue in the short term. Empire Flippers said this on Facebook:
Examples of the Impact For Two Actual Sites
I’ll share data from two sites and what the percentage the revenue went down. I’ll show you how to do the calculations for yourself later.
Example Site 1
This site is from the $500k niche site case study. This considers 60 days of data and we analyzed 80% of the revenue.
Example Site 2
This is a site of mine and I’ve mentioned it in a couple quarterly updates. I analyze all the data from 2016.
How to Find the Impact for Your Sites
It’s a pretty simple process and just takes a few steps.
- Login to your Amazon Associate Account.
- Click on the “Reports Tab” and the “Down Reports Section.”
- Select the Date Range you want to see.
- Click on the button to Generate the Report.
- Download the report and open it up in your spreadsheet app of choice.
What You Can Do If You Are Impacted
- Work with other affiliate programs. There are a bunch of affiliate programs out there. Walmart, for example, although you’ll be dealing with essentially the same commission payouts. That’s an intentional example, too. The point is the Amazon Associate program is still a great deal. People buy a lot on Amazon. Period. And even if you can work with another affiliate program you might not get the same volume of sales. Let’s say you can get a higher commission fee….
- Work directly with manufacturers and companies as an affiliate. You might get a higher commission fee for certain products, and you should check on that. I know I will. BUT you cannot assume it’s always a better deal. You need to A/B test each scenario and every niche, every site may be different. Just because a manufacturer will pay a higher commission rate doesn’t mean it’s always a higher profit. In fact, I can imagine it might be more profitable to work with Amazon Associates over the retail season and an individual company the rest of the year. Who knows…you have to test.
- Improve the conversion rate on your site. So you can do a lot of things on your site, and improving the conversion rate is always a good thing. It’s easier to do if your site gets a lot of traffic, but even if you don’t adding geo-targeting using a tool like Genius Link can move the needle.
- Consider Amazon FBA and use your niche site to promote it. I’m not into FBA myself, but many people are and it’s a great business. If you have the capital to invest and you have the drive to work on the supply chain side, FBA could be the perfect transition for your niche site.
- Look at what categories your site is promoting and consider better paying categories. Some niches have products that cross the category line. Let’s say you have a product line that fits in the Business & Industrial Supplies and Home Improvement categories. You should favor the Home Improvement category which pays 8% versus 6% for Business & Industrial Supplies – that’s 33% higher! If you carefully select the products you may be able to drive purchases to minimize the impact.
Why Is Amazon Making The Change
I wasn’t going to have this section in the post at all but people ask. It’s profit margins and the bottom line. Plus, Amazon is sort of a big company, and they can throw their weight around.
I know many people are saying, “Hey, we can work with other companies and Amazon will take a hit. We will make them hurt.”
Amazon is so big, I can’t imagine that affiliates make that big of a difference. I could be totally off my rocker, though. Before I learned about affiliate niche sites, I never knew that people could make significant money online (amazon affiliate income).
But the bottom line is that Amazon made the change to make more money.
What Do YOU Think?
Leave a comment below and let me know about your impact. If you don’t have a site yet, then let me know what you think.
Comments on this entry are closed.
I am sure that I am going to be in minority here but I love this change.
My major niche is one of the ones that is going to be 8%. I am nowhere near that rate currently because I wasn’t selling enough under the old system to get that rate.
Thanks Amazon for the pay raise 😉
Totally agree! Thanks Amazon! Looks like if earlier I could get 4% now I will get 8 or even 10% from 1 item. Nice move! And I don’t understand all this fuzz, people should be ready to changes every time as they depend on someone’s platform, it’s like any Google update always bring a lot of negative feedbacks.
Roman, that’s right. It’s all part of working with companies. There are whole industries that can be created or destroyed by changes in laws. Look at the environmental companies that were created through regulations…
Thanks for the comment, Ken! Yeah, it could help some people. 🙂
They just Avantlink more competitive.
Cory, thanks for the comment. Are you working with them already?
Looks like I’ll lose a little money on my commissions. Really glad I didn’t sink a ton of time and resources in some of those product categories. I feel for those of you who did…
Looks like a move to get affiliates to promote certain product categories over others. Why in the world would I focus on affiliate commissions on TV’s now?
Interested to see how this play out.
Dave, thanks for the comment. Yeah, it’s a real bummer for the people that were making full-time incomes.
Yeah, stay out of the wine niche!
I’m mostly camera related and have always been 4%… so nothing new here!
Carlin, thanks for the comment. Yep, some other affiliate programs, like New Egg, pay out 2.5% and have been for a while.
I’m in the jewelry niche. This is actually good for me.
Nice! That’s great, Mike, some people are getting a benefit from this!
While I’m sorry for those who will be hammered hard by this change, I see it as an opportunity to look for alternative (and maybe better) affiliate schemes. Also it’s a good time to investigate other options for monetization too.
Amazon’s just leveled the playing field a bit more for smaller scale sellers – no preferences dished out. Perhaps it will even discourage those who try and cheat the system. That’s definitely a win.
Making the affiliate program less desirable could have a load of benefits. I’ve already heard of some people throwing in the towel, well that just reduces competition doesn’t it!
Exactly! Less competition for real players! Let them all throw in the towels!
Marie, thanks for the comment. You’re right about this change and the opportunity. It’s going to force people to be creative and maybe look for something different. I know Amazon was a really easy and somewhat passive way to monetize a website.
Less competition is a great thing. 🙂
Interesting timing for me. As a resident of Missouri I was just let back into the program after being barred for for three years. I guess it’s good that I can pick the right categories to get back in the game. One bad thing for everyone: at least for now, I’m betting the price you’ll be able to get for an Amazon site will go down because potential buyers will be spooked by the changes in a program that has always seemed so stable.
Mark, Bittersweet, I guess.
What’s your take – Are you going to get back into the program?
I think you’ll be able to get a great deal on a site…or maybe people will hang on to them creating a shortage on the website market. It’s a lot like a housing bubble.
Thanks for the comment!
This looks like a real good move 🙂 I’ll start straight up from 8pc. I am in wedding and garden niche.
Eastcode, Great to hear it’s a good thing for you. Hopefully, the competition will be stable. There could be a big push to go to the higher paying tiers.
Overall a negative 20% hit for me. I worked through current categories and compared against new commission structure.
Richie, Bummer! Thanks for sharing your stats…I did the same thing and I’ll take a bigger hit. I’ll update this post for Monday with the specifics.
I did a rough check on one site that has sales on several categories that’s last month worked out on new structure http://imgur.com/jRBqbqS
It’s a rough approximation as the new categories don’t exaclty align with the old ones.
Interestingly, Industrial and Scientific which always had 8% doesn’t feature on the new structure, I just hope it doesn’t get relegated to other.
I have several sites in that niche.
I don’t think this is going to play out well for Amazon. The new sellers are going to make more money and the volume sellers like myself are going to look for alternative affiliate programs.
Chris, thanks for the comment. So I have a different take…I’m pretty sure that if you go somewhere else it won’t actually matter to Amazon at all. No matter your niche, there are dozens of competitors that will take your place. At least, that’s how I see things. Time will tell.
Doug,
I’m not exactly sure what you mean.
I think that it’s zero-sum in most cases, including mine. So if I had an amazon review page on Spalding basketballs, I would switch to the Spalding affiliate program. My ranking in Google stays the same, and Amazon gets nothing.
Chris, you’re 100% right on that. Sorry. 🙂 I was thinking of less competition and that angle. So that was totally dumb on my part! It sounds like you have the Google ranking in place and that shouldn’t change.
But, let’s say you get the Spalding affiliate deal and it pays 15%. The downside of course is that people will only be able to buy Spalding gear and you’d get no other commissions like you would in the Amazon ecosystem. I suppose you’d have to test to see what’s more profitable overall.
I’m not saying Amazon’s new, lower commissions would be more profitable, but I can imagine a scenario when it would be.
I would assume that the 15% small affiliate deal would ultimately beat the 5% amazon deal. However you would have to test and see. You’re right about the Amazon ecosystem, but remember that smaller affiliate programs usually have much longer cookie durations, and they will usually pay you quicker.
According to Jon Havers calculator we are going to lose 34% or 2k per month from this change which is pretty upsetting to say the least. It makes me think this was their plan all along to use affiliates to build their brand and then slowly eliminate them. It think it will hurt them in the end as they will slowly lose traffic as we look for other alternatives. Still grateful for the income stream but can’t see putting more effort and money into building niche products that only pay 4.5%. But maybe I will change my mind once i get over the shock and dissapointment. And a reminder how vulnerable we are when we really on a big corporation for our income streams. But what are the alternatives?
Art, OUCH. That’s the same ballpark as me percentage wise. It’s a kick in the butt for sure!
I’m not sure I agree about eliminating affiliates, but it’s interesting to think about paying out higher commissions for years to establish Amazon as the biggest player in the affiliate game.
The percentages change the game a lot, especially for affiliates making thousands and tens of thousands, but I think about making my first sale that paid about $2 and how I was thrilled about it. For many people, making enough to cover a car payment is a big, big deal. Paying a mortgage payment is even bigger – it’s one of the biggest expenditures that most people have.
Anyway, there seems to be a bump in the SEO Affiliate model every couple years, on one side or another.
My best income producing website will take a hit from 8% to 4 1/2% and 6%, depending on the product, which is pretty significant for me since I had just gotten to the 8% mark on volume. My other lower producing sites are all in the 8% range with the new rates, but were already due to volume. While I want the larger producing site to continue (it’s still growing in new traffic) and will be adding more articles, etc., to increase traffic in order to help compensate for the loss in revenue, I will definitely be building the other sites more to hopefully increase that traffic and revenue.
Although I am not an Amazon affiliate, I have been watching this market. With all of the “programs” out there put out by mastermind groups getting people to become new Amazon affiliates, it seems that the market has been saturated in the higher moving niches. Looking at this from a different perspective, it looks like a great opportunity for other market sites, that are currently not as a big as Amazon, to get a big boost in ship jumpers looking for a higher % on their products. If I were a VP at one of these sites, i would look at it as a great way to invest more money in advertising and payouts to get more affiliates on MY ship and grow my website. Thoughts?
Nothing ever stays the same. It either gets better or gets worse. That’s life. It seems like Amazon is trying to force affiliates to promote certain products or product categories based upon what Amazon’s commission for them is? Capitalism. No argument with it when you’re winning. So you cannot argue with it when you’re not winning. Just means more research and work, you know? Who knows when the next Amazon will come along? Boon or bust? It’s all on us. (Sorry for rhyming).
It is a not so good news for affiliate marketers but what is the best solution to counter this issue?
I may have missed the email from amazon and just recently noticed the message, ‘sell x more items and get 6%’ missing and was wondering why and started searching when i found this article. I just started with the program so not much to worry about for me. It would however be great if amazon could do something about their reporting as the reports are updated only once a day which is not ideal. they could at least update the ordered items and clicks report every hour.
A lot of people took a big hit, including myself. Especially since I just started a couple of months ago. I thought about quitting. Then I thought about it even more, yes it sucks, but that only means I have to work harder to create a well-running business. Life is very hard.
I am comparitively a newbie in amazon affiliate and perhaps I will get a chance to focus more on new niches with attractive payouts. The one that’s already there is on the higher side but one niche on health will take a hit I guess. But really a bad news for guys who have been focusing on their niches just learnt that they come under low % payouts.
I’m not sure how I feel about this change exactly. Leaning towards not good. I’ll be at the 4.5% tier now. I expected my category to be much higher since it’s Outdoors and usually companies make good margins on that. Before, selling just 7 products would have me at 6%. I’m sure I could even get to the 6.5% easily with 30+ products sold (old system). 2% makes a big difference when you sell alot. I’m just not sure crapping on Affiliates was the right move 🙁
Hello,
How can we combat this issue? Is there any other affiliate program which could beat amazon in terms of advertising fees? I would be more than happy to make a switch in future.
Mohit, not much you can do…Amazon converts so well that even a higher paying program isn’t as good.
Can you show us a site that is very succesfull in the informative products affiliate such as ClickBank. Just want to diversify and not to put all egss in one baskets
Sure, I’ll put it on the list. But I can tell you that you can find them if you search for products that are on marketplaces like ClickBank.