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Affiliate Death Blow? Amazon Fires a Shot across the bow

Amazon dealt a major blow to its affiliates this morning.

Amazon has long been a leader in online marketing, and affiliates often cite Amazon as a company built by affiliate networks. Amazon now takes a step that we at RKG have long advocated: barring affiliates from the Paid Search arena.

In an email to its affiliates this morning Amazon writes:

After careful review of how we are investing our advertising resources, we have made the decision to no longer pay referral fees to Associates who send users to www.amazon.com, www.amazon.ca, or www.endless.com through keyword bidding and other paid search on Google, Yahoo, MSN, and other search engines, and their extended search networks. …

As of May 1, 2009, Associates will not be paid referral fees for paid search traffic. Also, in connection with this change, as of May 1, 2009, Amazon will no longer make data feeds available to Associates for the purpose of sending users to the Amazon websites in the US or Canada via paid search.

Amazon has clearly done the math and determined that having affiliates competing against its own PPC efforts makes no sense. Not only do affiliates cannibalize sales on Amazon’s trademarks, they effectively increase the CPCs Amazon pays in its PPC program.

We expect this move to reverberate throughout the online retail community and would be surprised if other smart firms don’t follow suit.

Many thanks to Jeff Molander, a Web marketing speaker and CEO of Molander and Associates for passing along this news.

Commentary welcomed!

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Comments
10 Responses to “Affiliate Death Blow? Amazon Fires a Shot across the bow”
  1. Fred says:

    The only problem with this idea, besides being stupid beyond
    any comprehension, is that it assumes that Amazon.com employees can more intelligently spend the company money on advertising than affiliates can spend their own money in a true risk/reward scenario.

    Employees do not have the same motivation as people who
    risk their own money promoting products, whether their own or someone elses.

    That is precisely the reason our economy is in the tanks at
    the moment and the wizzards of Wall Street continue to dump
    good money (clients money) after bad, while assuring themselves of continued employment as long as they still have clients.

    The government does the same.

  2. Hmmmmmmmm,

    Seems to me that doing your job well rather than badly does have rewards: like salaries, promotions, bonuses, continued employment…

    The retailer itself also has far better understanding of what is valuable, where the margin is, what the lifetime value of a customer is, the impact of discounts on the bottom line, the value of new customers versus repeat buyers, changing needs for top line versus bottom line, etc.

    People who’ve actually worked in retail marketing on a national level are pretty dedicated to building a better mousetrap in my experience.

  3. “Employees do not have the same motivation as people who
    risk their own money promoting products, whether their own or someone elses.”

    Fred, is this the basis for your claim/argument? If so, it’s marvelously weak. First, it presumes that the employee is NOT invested in the budget they’re being paid to shepherd. The fact is, employees are forced to spend money wisely (like an affiliate) — or they’re fired. They money is just as much their own.

    Second, your argument presumes that the employee is not working for that performance-based bonus — just like affiliates do. Fact is, employees are bonused based on channel performance.

  4. Common Jeff, You should teach your friends at RKG better…

    Amazon killed search affiliates for two reasons:

    -They have an internal search team and they are worried about cannibalization between the two channels

    -Over ten states have come out with affiliate taxes nicknamed the Amazon Tax focusing on Amazon as a target. Shifting to CPC in those states makes the most sense. Why pay search affiliates on a click when you have an internal team?

    By the way when are you coming to WA again?

  5. Karen Garcia says:

    As any good business should, Amazon took a look at the big picture and made a decision that was best for them, both for internal search purposes and to better deal with the fact that they are squarely in the crosshairs of the American Booksellers Association. The ABA has been advocating changes to the definition of nexus in nearly every state under the guise of “e-fairness”. Legislators have perked up at this because it’s an easy way in their eyes to collect state entitled use taxes that the consumer is required to remit to the state…something that hardly ever occurs. Shifting to the CPC model means that Amazon protects its non-nexus status in many of the states that are now considering these sorts of laws.

    Given the current legislative landscape, this sort of move makes perfect sense to Amazon. Does that mean that everyone should jump on the bandwagon and not permit PPC affiliate advertisers at all or close their affiliate programs? Absolutely not. Part of running a successful marketing channel is continually taking a hard look at your metrics, analyzing what channel your customers are coming from, looking at the overlaps and making adjustments as neccessary. What works for Amazon’s infrastructure isn’t necessarily going to work for the small business with 15 employees and no PPC talent in the building.

  6. Karen, your point is well taken, but nexus isn’t just an issue for Amazon, most retailers need to be and are mindful of the tax implications involved.

    For the teeny tiny program, that PPC agencies won’t take and Andrew Cuomo isn’t watching maybe PPC affiliates make sense. For everyone else, I’m dubious.

  7. Hi, Angel…
    I have no argument on your points. Am I really expected to preface email forward with lectures about what’s what? :)

    For the record, I think George makes it all sound far to simplistic in terms of making a decision.

    Also, unrestricted trademark bidding is not at all relevant to this decision by Amazon — so introducing it as a related topic or reason why others will follow is… well, I won’t say it’s disengenous but… :)

  8. Oh, and I’d come back to WA for more of your wife’s cookin’ if you’d simply call off the affiliate fatwa on me.

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