Amazon’s affiliate program was first launched to the general public in 1996, making it among the first of its kind. Since then, the program has grown into an important revenue channel for Amazon and millions of marketers, with affiliates promoting more than 350 million products annually.
As with all affiliate programs, the Amazon Associates program has gone through many changes over the years. In 2020, the company announced a bunch of updates that affected a lot of the business. In this article, I will discuss what these changes are and how best to adapt to them.
What changes have been made to the Amazon affiliate program?
In April 2020, related blogs and posts started circulating about the planned update from Bezos and Co. on Amazon. According to them, these changes will center around the affiliate program and the percentages paid as commissions for affiliates.
The update, which was finally announced on April 15 and took effect on the 21st of the month, included reductions in commission rates across different product categories:
With the update, many popular product categories have seen massive reductions in commission rates.
Furniture commission rates, for example, have gone up from 8% to 3%, while groceries have shrunk from a 5% commission rate to 1%. Understandably, the changes led to some resistance across the affiliate community. Many companies deplore what they see as a conscious effort by Amazon to put their livelihoods at risk.
We’ll discuss how these changes affect business in the next section.
How did it affect the business?
The announcement of the updates came as a shock to affiliate marketing partners everywhere, especially since it happened in the middle of a pandemic. Some bloggers claimed that the Amazon affiliate program is dead, while others saw it as an opportunity to expand their business. Here are some of the biggest impacts of the Amazon update on business:
Ally’s website ratings have fallen.
Without a doubt, the reduction in Amazon’s commission rate has led to a decrease in the profitability of affiliate websites. According to one study, profit losses ranged from 10% to 60%. The same study also concluded that more than 694,000 Amazon affiliates lost nearly $800 million after the changes. Or, in other words, Amazon’s profitability jumped by $800 million.
The positive side for investors is that low profit margins have made the sites more affordable. At Empire Flippers alone, there are dozens of Amazon-related sites available for someone with enough patience to work on:
Many of these sites still have a high rate of traffic and revenue. They no longer generate as much profit as they used to, mainly due to the changes.
Change is a golden opportunity for aspiring business owners.
The least diverse subsidiaries were the most affected.
As expected, websites that got the bulk of their revenue through Amazon affiliate links were among the hardest hit by the April 2020 update. In contrast, many super affiliates with diversified incomes were in a better position to handle the change.
The nightly impact of company policies highlights the importance of diversifying your sales and marketing channels. For example, any change in Google’s algorithm can infect sites that depend entirely on organic search traffic.
Websites have been forced to branch out to other affiliate networks.
With income from Amazon affiliate marketing dropping overnight, site owners are looking for other affiliate programs that offer more competitive rates. Targeted affiliate program, for example, is an attractive option for people looking for a volume-based commission structure. Once viewed as one of Amazon’s notable acquisitions, Target sells only brand-name products.
However, each affiliate marketing program has its own advantages. For example, with Target, some high-volume product categories, such as sporting goods, groceries, and household items, don’t qualify for a commission.
Niche websites are also turning into industry-specific affiliate programs. These include BHPhotoVideo, which offers up to 8% commission on electronics; NewEgg, specialized in computer parts and accessories; and Rakuten, which operates Walmart’s and Best Buy’s affiliate programs.
Display advertising is becoming more and more attractive.
Banner ads have been around for a long time. Two years ago from affiliate marketing, to be exact. AT&T’s first ad was just a small rectangular logo. Since then, they haven’t changed much. They often feature products, brands, and a compelling call to action. Display advertising is so powerful that its share of global ad spending does not exceed that of television advertising.
While there are hundreds of display advertising programs on the market today, Google AdSense is still at the top of the pile. This is probably the easiest way to break into website monetization – just add some code to your site and let AdSense do its magic. Advertisers will then use Smart Bidding to target your visitors and display their ads on your site.
Unfortunately, display ads will never offer the potential to monetize affiliate marketing. After all, if an advertiser is paying for an ad on your site and making a profit, you’re missing out on that trick.
Amazon’s 2020 update has left website owners and affiliate partners everywhere at a loss for what they see as a money grab, especially after affiliate site ratings plummet. However, modernization is also an excellent opportunity for companies to diversify their revenue sources.
For example, many websites have been forced to promote product lines that were not in their original range. Some have also chosen to subscribe to other affiliate programs to ensure a fairer distribution of revenue sources. Display advertising has also seen a resurgence as web owners look for ways to increase declining revenue.
Time will tell whether the changes reverse once the economic climate is restored, or whether Amazon sticks to the new commission model. Although the initial reaction to the Amazon 2020 update was negative, it is also a wake-up call for site owners to either diversify or switch from Amazon altogether.