Amazon Commission Changes in 2020: The End of an Era? Or an Opportunity?
The only thing that stays the same is that things always change.
Nowhere is that truer than in the online business world. Right now, it is happening with Amazon. Amazon announced today a site-wide rollout of commission structure change for their affiliates (they have officially announced this change here) that will be implemented as of April 21st.
When dramatic business-impacting changes like this come out, many people shout that the business model is dead or can no longer make money. They close up shop and leave the online world altogether.
While this change WILL hurt a ton of affiliates, but there are still some opportunities people can take advantage of as these changes roll out.
A Reminder to Diversify
Those who will suffer most from this change are affiliates that didn’t pursue diversifying their income source. Many authority site builders rely on Amazon as their sole source of income, which is a risky move for the long-term health of their media companies they are building. Affiliates across Amazon’s program will likely be getting hit hard by this as Amazon slashes some of the most popular categories by large percentages.
You can see the new changes below:
These changes will make some affiliate income plummet by double digits in realized earnings.
Of course, these changes don’t mean there is no opportunity left as an Amazon Associates. There are plenty of products to still sell on Amazon and the conversion rate is high enough that it can be a great income source. The keyword here is “a” income source. The program is great for sites just starting out without a ton of traction yet, sites that are still building out those coveted audiences. As a site grows in its authority, traffic levels and engaged audiences though, they should be looking outside of Amazon for more revenue streams to add to their mix.
What Will Happen to Amazon Affiliate Site Valuations?
There’s no getting around it, making less money directly translates into a less valuable business. The valuations will go down, in some cases quite significantly. Again this clearly depends on the category of the site as some had their commissions reduced more than others.
Note from Justin & Joe: We will be repricing ALL of the Amazon Associates sites on our marketplace to reflect this change. Our methodology for this will include using the seller’s earning report from Amazon. We have created a formula using historical sales that adjusts the commission percentage based on the new rates that Amazon has rolled out. These rates are adjusted in every category and accurately updated with the historical earning amounts. Since every item is in a different commission category, we will take every category that the website is selling in into account for the new adjusted valuation price.
Some Amazon affiliate site builders will continue with business-as-usual, but others are looking to at least diversify their businesses, if not move away from Amazon entirely. While you can still sell these assets for a very nice exit, it’s probably worth at least revisiting the fact that having all of your earnings on another platform opens you up to risk when/if they decide to make changes.
We’ll dive deeper into how you may want to diversify below.
The good news about selling Amazon affiliate sites is that buyers still consider them an excellent investment opportunity. From a buyer’s standpoint, not much is likely to change. The sites are still very hands-off and require little to very slight management on their part to run. If anything, they will be getting a slight “discount” on these Amazon affiliate sites since the sites themselves will still be attracting the same amount of traffic that they can use to split-test new offers once they acquire the sites.
How Affiliates Who Took A Hit Might Recover & Future Proof Their Business
Amazon is often cited (especially by themselves) as the best affiliate program around. When it comes to physical products, they have almost any item you can think of for sale. It is easy to use and people love shopping on Amazon.
That does not necessarily mean they are the best option for every niche.
In fact, depending on your niche there might be other affiliate programs that pay you far more than what Amazon is paying even on the old structure they had. Many of these affiliate programs will pay higher rates and will often have much longer cookies. Amazon cookies every visitor that clicks on your affiliate link for 24 hours, meaning anything that person buys within 24 hours will be attributed to your account.
Other affiliate programs can have as long as 90-day cookies, meaning anything that visitor buys from that website within 90 days will be attributed to your account. That is a long time, and it can make a big difference in revenue. You will still want to split test this, but by doing so you might find a big win just by switching over to a different affiliate program.
Even though we know Amazon has major trust with consumers and a well-optimized funnel, the increased percentages, and longer cookies other affiliates offer may now be worth exploring for your site.
Other Affiliate Networks
As a niche site builder, you should consider building out a genuine authority site… one that goes beyond the Amazon Associates program as a singular monetization method. Authority sites can net you a much higher ROI, typically have diversified traffic and revenue streams, and thus can protect against changes in any one program better than a niche site that only earns revenue from Amazon Associates.
There are dozens of affiliate networks that exist out there that have thousands of different offers you can promote. You can also find private affiliate programs by reaching out to the actual product owners to see if they have one or help them set up one. Amazon is by far not the only game in town. Considering the longer cookie and higher commissions that you can get when you go the non-Amazon route, this is something every affiliate should eventually consider in their site’s growth plan.
Unlike Amazon, many of these networks will give you an affiliate manager. These managers are there to help you out, listen to your needs and if you provide them solid traffic they will often be open to raising your commission. Amazon would never do this for you unless you were a huge affiliate for them with a gigantic media site in their program that they want to keep happy. But for other affiliate networks? It is just part of their normal day to day structure to take care of their affiliates and make sure they’re treated well.
If you’re curious, we actually wrote an article a while back on the top 10 affiliate networks that aren’t Amazon. Check out the article to see if you can start replacing your Amazon links with a more profitable network.
Buying Up Property
The last thing to note is that if you are a big affiliate in the Amazon Associates game, you might see a lot of competition drained from the market by this change. Many Amazon affiliates will likely feel burned by Amazon, pack in their bags, and leave the game entirely.
This could leave many once competitive niches with a lot more gaps for you to build and leverage into with your niche sites. While we don’t believe we’ll see a mass exodus from Amazon Associates, some niches may be more affected by this than others so it may pay to look for gaps in the market. Make sure to register a free account with our marketplace if you are keen to see if anything makes sense for you to acquire.
Display advertising has made several advances over the last few years. If your plan is to grow out a large authority site that acts more like a mini-media company than display ads are a fantastic revenue source. When you focus on display ad revenue, it opens you up to a plethora of keywords you may never have gone after before. Now, you get to write about an endless amount of information topics that can drive large volumes of traffic to your business. Over time, it is not uncommon for large sites to find their display ad revenue eclipsing their affiliate revenue.
Despite what some affiliates may think, we have never seen any truth in the idea that installing display ads on your site will take away from your affiliate revenue. In fact, if anything we’ve only ever seen the opposite happen. This is likely due to people are strangely more trusting of websites that use display ads as every big media site on the internet also uses display ads, thus the actual website user is used to seeing them on sites they trust.
An Opportunity for Amazon FBA Owners with Cash On Hand
There is another opportunity out there for the savvy Amazon FBA owner, or e-commerce store owner, as this Amazon update rolls out industry-wide. That advantage is the ability to strategically buy Amazon affiliate sites that are related to your niche. When you do this, you are basically buying traffic at a discount since these Amazon sites will dip in their earnings, and thus value, while still keeping the same amount of traffic.
These strategic buys can lead to new insightful data as well. You will see other products within your niche that the audience is prone to buy, which can help you in deciding to launch your next product. Also, each of these sites can become little satellite sites that can collect emails for your overall brand.
The important thing is finding a site that works for your product specifically. This can be a bit tricky, depending on what you are selling. It is unlikely you are going to find a site that is selling your EXACT product (though it is a nice bonus if they do). On the other hand, you should be looking at sites that are closely related to your niche – if you’re selling running shoes and you stumble upon an Amazon affiliate site selling treadmills, for instance, this could be a good purchase for you as a way to sell more of your shoes. If you sell hardcore health juicers, an Amazon affiliate kitchen website could potentially be alright, but you would likely see far less benefit of buying that site as a strategic acquisition.
You buy these sites for cheaper than what they would had been a month ago, replace the links with links to your physical product, and revamp the sites to become email collecting machines that can be used to launch any new product you create – not to mention bringing back old customers to either your Amazon FBA listings or to the affiliate site for more potential sales and engagement.
Of course, if you’re the Amazon affiliate in this case, you might instead look to buy Amazon FBA businesses related to your affiliate site so you can double dip through both Amazon’s program as well as the margin you get per unit.
The Only Constant is Change
Again, the only constant in the online business world is changing. With every change, comes drawbacks and opportunities. In order to see these, you need to take a step back to look at the big picture. Every year or two there is a major shakeup in the online space, here is a list of just a FEW changes that had entrepreneurs grumbling in the last few years:
- Google Panda / Penguin Updates
- The Google Adwords Slap affected many sites relying on paid traffic.
- Amazon’s Review Smack Down impacted some FBA businesses, but especially those looking to get their new businesses off the ground.
- Facebook’s organic reach declining dramatically over the years as they force more and more businesses to use their ad platform instead.
These aren’t the only changes that have come about, and Amazon’s newest commission structure change will definitely not be the last change that shakes up the online world.
If you want to survive the next 10-20 years then you need to learn to adapt to the changes. Every setback for someone provides an opportunity for another, and while everyone else is yelling the world is falling apart you will be using first mover’s advantage to further your own business.
Instead of niche sites, build out huge authority sites. Instead of allowing just one platform to control so much of your business like with Amazon’s Associates program, focus on developing multiple income streams.
Look for opportunities to diversify both with traffic and revenue streams. Not only will it make your business potentially more valuable, it will also protect it against changes like this in the future.
At the end of the day, adaptability is the key.
What changes will you make in your business going forward? How has the Amazon Associates change affected your business? Let us know in the comments!