Reduced commission rates on select product categories go into effect today for Amazon’s affiliate marketing program. Those who reply upon the program to monetize their websites are unsurprisingly unhappy; many, however, saw the cuts coming and have one word for those caught off guard: Diversify.
Amazon’s affiliate program, called Amazon Associates, pays bloggers, website owners and digital publishers a referral fee when links from their online content drive purchases from Amazon. While the income generated can be a side hustle for small players just dabbling with the program, the revenue loss will be bigger for online publishers like CNET, Consumer Reports, BuzzFeed and the New York Times.
For some product categories, such as Luxury Beauty, the commission Amazon pays is as high as 10%. The affiliate payout rate for Luxury Beauty remains unchanged while fees paid on Amazon sales in the Furniture, Home, Home Improvement and Lawn & Garden categories now are reduced by more than half—from 8% to 3% as of today. Grocery commission fees were slashed yet more dramatically, from 5% to 1%, effective today.
“This is no doubt a harsh blow, not only for large digital media outlets and publishers, but also for smaller website owners who have spent the last several years building up content dedicated to recommending products purchased on Amazon,” says Kelly Fedio, founder of Digital Shelf Strategy, an Amazon consulting firm.
“For these smaller businesses, sadly, their livelihoods could very likely get wiped out.”
The new commission structure includes deep cuts to product categories experiencing high demand due to the COVID-19 outbreak, such as Health and Personal Care items whose payout rate plummeted to 1% today, down from 4.5%. For that reason, some speculate it was the global health crisis that prompted the changes even though an Amazon spokesman told CNBC last week the fees were updated as a result of its periodic evaluation practices.
“I don’t think this is only due to COVID. I think this is Amazon routinely reviewing its programs and profitability, and adjusting as necessary,” says Fahim Naim, founder and CEO of eShopportunity, the Amazon consulting firm he founded after serving as a category manager at Amazon.
It was only a few years ago, in 2017, when a similar restructuring of commission fees sparked an uproar from affiliates enrolled in Amazon’s program.
Naim said the fee changes Amazon put into effect today are likely part of a long-term play, though the timing could be better. “Even if it’s the right business decision, they aren’t doing themselves a favor by announcing this during the COVID chaos,” he says. “I’m a bit surprised they didn’t wait another month or two before announcing this.”
Amazon stock hit an all-time high, soaring to $2,283 per share April 14, the same day the commission rate reductions came to light.
Reddit posters registered their dismay over the fee cuts: “What a cruel time to do it, but it is, as you say, capitalism’s way,” wrote okletsdothisthang last week after the changes were announced. “Lots of sites are about to go on sale, too. I know we say these things every time this happens, but to add one last cliche: diversify diversify diversify.”
Fedio, who founded and built her One Savvy Girl outdoor lifestyle brand on Amazon before launching her consulting firm, agrees those who rely on commissions from Amazon should anticipate change and strategize for the long term.
“If you want to survive for the long haul, then you need to adapt to the changes. This should be a stark reminder of the need to diversify, as there are huge risks to a singular monetization method around a platform you don’t control,” she says.
While some businesses will be hurt by the changes and others may move away from Amazon entirely, Fedio says there are other opportunities and affiliate networks to consider. “Amazon is by far not the only game in town,” she says. “Look for opportunities to diversify both with traffic and revenue streams.”
The Amazon Associates affiliate marketing program and other programs may see more changes in the future as subsequent reviews and adjustments are inevitable.
“I expect Amazon to start pushing their offshoot influencer programs harder in the future, so I believe they still understand the importance of external traffic,” adds Naim. “They are probably just trying to right the ship as it relates to the profitability of the program.”
Amazon CEO Jeff Bezos provides more cues for what’s ahead in his annual letter to shareholders released last week.