Bam! Amazon earnings down over 34%.
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
- 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.
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.
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.