Earlier this week, Amazon announced it will be cutting commision rates for members of Amazon Associates; its affiliate programme which a large number of publishers are a member of. The cuts are set to go into effect from April 21st, with some product categories seeing drops of more than 50%, according to CNBC.
Affiliate commerce has grown in importance as a revenue stream for a range of publishers, including Buzzfeed, Vox Media, Future plc, The New York Times and Conde Nast. Other popular retailers also run affiliate programmes, but in the US, Amazon dominates with almost 50% of the market share.
Affiliate revenue is a commission-based model where a retailer such as Amazon or eBay provides coded affiliate links for influencers, bloggers and publishers to use on their sites. These might be used by a publisher in a piece on ‘Top 10 best headphones’ or other buying guides, with a link to buy the product after the summary or review.
Revenue is commonly paid out on a Pay Per Click or Pay Per Sale model, where the publisher gets a proportion of the item’s value once the sale is completed. According to CNBC, rates on furniture and home improvement products are falling from 8% to 3%, and the commission for grocery products from 5% to 1%.
Even for publishers who have diversified revenue streams, this is yet another blow. With advertising revenue plummeting, money from events decimated and blocklists preventing sites making any money from the huge surge in traffic to coronavirus-related content, eCommerce and affiliate revenue seemed to be stable.
In fact, many publishers—in line with Amazon themselves—have reported growth in eCommerce transactions since the crisis, thanks to people shopping from home. Future plc this week shared data which showed an uptick in traffic and engagement, with global pageviews for eCommerce content up 44% in March compared to the previous month.
But this move from Amazon puts the relative stability of affiliate revenue at risk, at a time when some publishers are already on the brink. And it’s not just publishers who could end up feeling the pinch. eCommerce companies, small businesses and influencers could also see revenue drastically reduced.
Publishers may reevaluate future dependencies with Amazon
Although the timing may cause publishers difficulty with the ongoing coronavirus crisis squeezing income streams elsewhere, it makes sense for Amazon. The retail giant has seen a surge in demand as people are forced to shop for goods from the safety of their homes, and is hiring hundreds of thousands of new workers to keep up with demand, both in its warehouses and on the delivery side.
Perhaps Amazon has decided that – for the present – they don’t need the extra marketing power that publishers offer. Damian Radcliffe, a Professor in Journalism at the University of Oregon, and author of WNIP’s The Publisher’s Guide to eCommerce, thinks that the timing is disappointing.
“Given that much of Amazon’s inventory – and therefore a key part of its success – derives from products made by others, including publishers, this feels like a kick in the teeth,” he told us. “As #StayAtHome orders – and retail closures – drive more people to shop online, this could be an opportunity for Amazon to broaden the range of their eCommerce partnerships.”
“Instead, they seem to have gone the other way, perhaps recognising that in this time of crisis, people are coming to them directly, and they don’t need the profile and leads generated by publishers.”
Radcliffe thinks that this could force publishers to reevaluate future dependencies with Amazon. “For publishers it will reinforce, yet again, the problematic relationship they have with platforms,” he said.
Rate evaluations are standard industry practice: Amazon
It is worth noting however that affiliate rates often change across programmes. Black Friday and Christmas periods can see retailers either reducing their commissioning rates as they can generate demand themselves, or increasing rates so links to their sites are prioritised above others.
An Amazon spokesperson told CNBC that they regularly evaluate their programme offerings to ensure it’s competing with the broader industry, and that such rate evaluations are standard industry practice.
“Even pre-crisis, retailers’ rates fluctuated often and without notice,” Hanna Fritzinger, Head of Marketing for Sovrn told us. Sovrn themselves have developed a feature called Optimize, which automatically directs a publisher’s commercial links to the merchant that will pay the highest commission for that specific product.
“This protects publisher revenue and alleviates the need for them to constantly shift what they’re linking out to,” Fritzinger explained. “It also rewards the highest paying merchants by allowing them to capture competitive traffic.”
Now more than ever, we want publishers to be able to focus on creating great content, not manually swapping out links.Hanna Fritzinger, Sovrn
It is also worth noting that the affiliate changes have come from Amazon US, and so far there has been no indication that Amazon UK will be significantly changing any of its pricing for UK publishers.
Fluctuations aside, the timing of the cuts is likely to cause problems for many publishers as businesses around the world grapple with the fallout of coronavirus. The extent of the impact depends on how reliant individual publishers are on affiliate revenue from Amazon itself, and whether the initial surge in traffic continues.
Disclosure: What’s New in Publishing is wholly owned by Sovrn Holdings, Inc.