2020 Amazon Associates Commission Structure Change: The End of Easy Money & A Huge Opportunity for New DTC Brands

If you are in the publishing or affiliate space, you likely heard the news of Amazon once again slashing their affiliate commission structure, this time lowering their commission rates to between 1 and 4 % across all major categories, a significant decrease in revenue for many publishers in the midst of the coronavirus pandemic.

Gradually Then Suddenly

From This

To This (2017)

To This (2020)

At Least Buy Us Dinner First…

Marketers and publishers understand that difficult business decisions are sometimes necessary to ensure the sustainability of a company.

With this change Amazon has reduced their publisher spend by hundreds of millions of dollars, likely without a direct loss of revenue (in the short term) which will improve their bottom line and allow them to focus on their essential categories during the current unprecedented coronavirus pandemic and other businesses.

But to the tens of thousands of publishers, bloggers, and social media content creators that have grown accustomed to their Amazon commission checks, the swiftness and lack of notice of the changes sent a message loud and clear, one which many were suspecting and feeling for years:

We are Amazon, we dominate ecommerce, more than 80% of US household are Prime members, we don’t need you or care about your marginal contribution to our business.

History Repeats Itself

While this message may seem harsh, affiliates are used to it, as virtually every other large retailer has already made the same changes to diminish their affiliate commission rates years ago.

BestBuy’s Affiliate Program Rates (As of 5/25/2020)

The reason it hurts more with Amazon is they are the largest affiliate program in the world and for many years have offered the best rates on virtually any physical product, while also having the strongest brand and conversion rates of any online retailer.

Amazon Was Built On Affiliates

Affiliates were a key to making Amazon who they are today.

While Amazon was widely recognized by the traditional media and ad world for leveraging underpriced Google Ads, and were for a long period of time, the platform’s largest advertiser.

The fact their affiliates blanketed all transactional keyword SERP’s with recommendations to purchase from Amazon from “unbiased” organic results had an even greater effect in conditioning consumers to purchase, trust, and eventually go direct to Amazon when buying a product ;not to mention the SEO benefit of the billions of affiliate links to their website.

The Future of Amazon Associates Program

There will likely continue to be exclusive rate agreements with premium (and on-side recommendation) publishers, but we think the open public program terms will continue to diminish over the coming years. The decrease my not be to the commission percentage, but more so to how additional purchased items that aren’t linked to directly are treated.

Permanent Change or COVID Special Circumstance?

I think it’s permanent for the public facing problem, I do think that “premium” publishers like Meredith and New York Times as well as content providers they promote likely have a special arraignment where they receive higher rates.

More Players Competing for a Smaller Pie

There is less easy money in the system and more competent companies and individuals competing for transactional affiliate terms today than 3, 5, or 10 years ago.

The wide arbitrage that existed between the cost of capturing rankings for long tail transactional physical product keywords and Amazon’s affiliate program continues to close.

Still An Important Monetization Method, But Not the Only One

Overall the Amazon affiliate program is still competitive and is still likely the best option for many physical products and generic “top 10” lists when you factor in their conversion rates.

However the switching costs to other programs now is lower as the Amazon program is now more aligned with the market. The means account bans are less of a concern and other programs should be tested thoroughly before defaulting to Amazon.

Short Term Publisher Impacts

Across the board earnings of pure Amazon affiliate sites was around $140 per 1000 views, we are now seeing numbers down to ~$60/1000 views depending on the niche and the commission category they fall into.

While this is a drastic reduction for many, it can be offset when you consider “premium” ad networks can add an additional $15-$20/1000 views depending on the niche and advertising cycles and an email list or info products can become more a priority.

Additional impacts include:

  • Less Risky to acquire Amazon affiliate sites – lower affiliate switching costs.
  • More Negotiating and split testing retailers required.
  • More people entering and shifting to obvious non-Amazon affiliate verticals: sleep, CBD, VPN, online gaming, ect.
  • “Premium” publishers likely have a higher Amazon affiliate fee structure and can continue investing in affiliate content.
  • More affiliate shifting to course or guru model
  • Greater shift to other channels like podcasts and Youtube

Who Will Step Up to The Plate?

Affiliates are tired of Amazon and actively seeking other companies to promote who will treat them better and provide more attractive terms. This would be a great time for large retailers to create more aggressive programs, however we haven’t seen them capitalize on this.

This would be a great time for brands to reach out directly to sites ranking for transactional terms in their category to create custom deals and find win-win opportunities. Affiliate are receptive and brands benefit from not competing with funded startups in paid auction based acquisition channels like Facebook, Instagram, Adwords, ect.

At a minimum if you run a content site, definitely reach out to brands you are promoting to create custom relationships or even consider creating your own ecommerce brand if the margins are attractive.

Long Term Opportunities

  • Build owned ecommerce brands from content sites to promote
  • Leverage SEO skills gained to build a local services company, lead gen business, agency, SaSS, ect.
  • Increased willingness to target non transactional high volume terms for display ad revenue.
  • Build email list and info products.
  • Test other affiliate programs
  • Build direct relationships with brands – both hate being overly reliant on Amazon.

Digital Marketers Are Cockroaches

If you have been working on the internet for any length of time this is not your first rodeo. Algorithm changes, commission cuts, organic reach changes, penalties, changing consumer trends, and competition are always a very real treat to your livelihood. But every time dynamics shift, crafty individuals will find new opportunities and angles and pounce on them.

Optimistic About the Future

As the real world becomes secondary to the digital world and products/services continue to be commoditized, the ability to tell your story and capture consumer attention will become an increasingly appreciated skill.

I suspect the coming economic hardship will push trendy DTC brands to pursue more profitable and sustainable growth methods – a la affiliate.

Online and affiliate marketers with in-the-trenches experience will thrive.

Recently I heard a podcast episode “My First Million” where the guest talked about this early days slinging berries and dating offers as an affilate. The host of the show chimed in and said ex affiliates are some of the people they look to hire and are most undervalued in todays market as they actually understand how traffic and the internet work.

I completely agree, seeing behind the curtain of large corporate performance marketing companies with large well-known sites, there is really no secret sauce, and in many cases the emperor has no clothes.

Many solo and passionate part time affiliates have a better understanding of the landscape and the tactics to drive incremental revenue improvement than execs with MBA’s and Silicon Valley startup “growth marketers”.

The same skills to drive traffic and revenue for affiliate offers can be applied to almost any digital based business.

Once you realize this, the internet becomes your playground.

While the commissions cut will sting in the short term for many, it will push many to build stronger more sustainable businesses that will be much more valuable for the long term.