I make some money with their affiliate program. Not a lot, just enough to buy ourselves dinner out a few times a month. But I always consider it to be a nice bonus. I know the program can change any time. I know my web traffic can die off. Someone else could build a new site that is better than mine. Or something completely unanticipated could shut down this income. These are all risks that I accept with open eyes.
The danger comes if you are not aware of the risks inherent in your own income. Sometimes it does make sense to let your income have some instability in it, and let someone else control it -- maybe it is a case like mine where it is small enough to not matter. Or maybe it is large enough that it is worth the risk. Just don't let yourself get in a situation where it is large enough that you are living on it, but not so large that the risks are acceptable. Because that is when changes like this will bite you.
It will change again, you can rest assured of that. I think you have the right attitude toward it, FWIW. The FBA'ers out there are in a similar position and many of them rely way too heavily on Amazon for their income. These guys/gals started with/as affiliates... and have graduated to "branding" cheap chinese stuff.
I tried doing some FBA, but it felt super scammy. Research products that people are buying then just work the pay per click, give some products away for review, and try to "out manipulate" your competition. It is going to end badly for a lot of them. China is learning how to beat them at their own game. The guys that run seminars on this stuff... uggh... nuff said.
I completely agree with your opinion on the FBA (Fulfillment by Amazon) crowd being the same boat. It's not a great feeling to have your business built on someone else's platform and I'm doing everything I can at the moment to reduce our reliance on Amazon.
I'm surprised that you felt that selling things via FBA is scammy. I have a full-time job but I also own a business that (currently) grosses about $150K on Amazon. I can honestly say that I don't feel like we've out-manipulated anyone or have done anything but create a very competitive product that we're able to sell at a competitive price.
I agree that it quickly turns into a very painful race to the bottom when dozens of vendors are selling variations of the thing (e.g. silicone grill gloves or meat claws), but it's completely different when you're able to take the time to create a really great product. It's been a rewarding experience; I highly recommend it to anyone who doesn't mind answering the occasional support email and is completely committed to excellent customer service.
I was getting confused by the "FBA" term, so for those curious this almost certainly means "Fulfilled By Amazon" which is the program where you ship your product to Amazon, list it there, and they pull it from their warehouse and ship it - basically using Amazon as a drop shipper.
That's almost certainly a hard business to make money on - if you're doing common off-the-shelf items of any value, Amazon can simply add those themselves, and they're probably getting a better price on them with bulk purchases than anyone doing FBA can get. If it's direct sales of items you produce yourself then there are drawbacks if your items don't sell (high charges to ship them back to you apparently mean a lot of them end up being destroyed) or if you get targeted by scammers (e.g. NPR's Planet Money #724 "Cat Scam"[1], IIRC the "scam" part comes in with returns).
Just to throw an alternative view to the "FBA is a Scam" threads.
I had a similar thought when I first heard about it, but then decided that I should give it a try as I am always dismissing things out of hands for believing that they are scams.
One year later I've quit my job (full stack developer), and sell full-time on Amazon and have never been happier. My current listings generate the majority of my income and require just a few hours a month to maintain.
For the rest of my time I do whatever I want.
It's not that things are inherently scammy, or unscammy. It's just things are or aren't easy based on your ability/work ethic, and the competition is or isn't steep based on how uninspired you are when competing.
The whole "cheap chinese knockoffs" thing is dismissive and frequently inaccurate. The great majority of things that people purchase from Walmart/Amazon/Target are manufactured in China, full stop. Some of it is cheap, yes, but no more or less than the ones by the "name brand" private labelers.
FBA seems a far worse business than affiliate stuff. Affiliates seem to have a lot more options (various affiliate programmes, ads as a fallback option, etc.), whereas an FBAer who buys bad stock or has their category become more competitive is out of luck.
> China is learning how to beat them at their own game.
Awesome, I hope that works out.
I've been super concerned when I've seen friends buy products off Amazon for 2-4x the cost I find the same product on AliExpress for. It's ridiculously common to find identical hardware with a huge markup and a random logo stamped on it on Amazon.
Some of the stuff is total junk, other things are actually quite good - but you may as well just buy it from the source and not pay a middleman several times the cost.
The FBA thing and the seminars are a slow motion train-wreck waiting to happen. You are right in highlighting the folks running seminars. They are running such scams.
A good friend of mine jumped into the "amazing opportunity" he was presented with. He paid them $5,000 for an FBA course. Long story short, he ends-up importing a bunch of kitchen crap from China, dropping tens of thousands of dollars.
As things progressed, many of the people on the same course did exactly the same. Very soon you had page after page on Amazon with poor bastards selling the same products from China under different brand names and packaging. I mean, exactly the same damn product.
Funny as hell if it weren't so tragic because of how these folks are suffering. People are losing their asses on this stuff. They are killing each other paying incredible amounts for Amazon PPC advertising. Amazon is laughing all the way to the bank and these vendors are bleeding right and left selling the same products, from the same suppliers in China at minimal, if any, profit.
And then you have the Chinese suppliers who got wind of this and are doing two things:
First, they raise their prices. How stupid do you have to be as a supplier not to recognize something is going on when you get call after call from would-be entrepreneurs using exactly the same script to negotiate with you. These suppliers are nailing people for all they are worth.
Second, they are listing their own products on Amazon at the best possible prices because, well, they are the manufacturer!
And then, to make things even more interesting, people following these amazing formulas start importing stuff that runs right smack into intellectual property issues. So, the patent or trademark owner files with Amazon and the listings are suspended. The inventory now can't be sold and, to make matters worst, the vendor has to pay through their teeth to have it shipped out of Amazon. Ship it where? None of these people are real businesses with real warehouses and employees! So now they have a a few pallets full of crap they can't sell almost anywhere in their garage and living room. In some cases IP owners have gone as far as issuing C&D orders to these vendors.
The whole thing is absolutely surreal. Carnage is the first word that comes to mind when I think of the results. Sure, as always there are examples of folks who are just killing it because they got lucky, chose the right product or whatever. I'd say 95% of the folks who enter into these FBA "get rich quick, work from home, travel the world" schemes would have made more money if they took $5,000 and burned it.
As for my friend, some $35,000 later he quit and licked his wounds.
Not mentioned is the damage to consumers. These desperate, low capital, no-experience vendors are importing absolute crap from China. There are stores of phone chargers that go "poof" and other crap product issues right and left. And, if you dig deep enough, it will almost always land on some poor fucker who thought he or she was starting a business that would set them up for life.
Could be the scam of the century. The only people getting rich with consistency are those peddling the courses.
On top of that the FBA also seems to enable massive tax fraud. There was a report on German TV recently that the vast majority of products for certain categories that are produced in Asia (mostly China) shipped via FBA on amazon.de don't list any sales tax on the recipes and it seems the sales tax is simply never collected (the companies usually don't even have a tax number). Seems like very massive tax fraud, not sure if Amazon could be sued over this for enabling tax fraud at least it seems they are pretty lax about it. Iirc due to English laws, amazon.co.uk requires that every seller has a tax number.
People get a bit bratty when Amazon drops the rates on certain categories. They need to be clear on what the Affiliate program's purpose is. The goal isn't to kick back money to people who link to Amazon, it's there to make Amazon dominant in multiple markets.
They're there now. They have critical mass. They're the first place organic search for new stuff.
There's no sense in throwing money after sales they'd already get. They're better off using it as discount to get sales they wouldn't.
True, the goal isn't to kick back money, but the goal is to refer people to Amazon that wouldn't have purchased from there otherwise. They have good fraud detection systems in place to make sure that people aren't just using the affiliate program to give Amazon discounts to themselves, friends, family.
Ultimately Amazon does what every company does in some form or another as it scales--cut incentives, trim margins, increase on-site advertising, etc. It's one long life cycle game that plays out again and again.
The problem with that goal is that affiliate links are having less and less of an impact on convincing people to buy from Amazon, because Amazon is becoming the #1 place where people buy things anyway. If I read about something on the Wirecutter and I decided to buy it, I will buy it on Amazon whether or not they have a link to Amazon. Amazon knows this, and as they begin to dominate online sales in a certain category they can afford to drop their affiliate commissions knowing full well that it won't really impact their sales.
As someone that doesn't use the program but does own an etf that covers the market, it's weird to think that I benefit from this change - at most a penny or so.
It will be a big loss for pc tech YouTube reviewers, I know it's a big chunk of their revenue. They already removed a lot of them from their affiliate program because youtubers used to just tell viewers to bookmark their affiliate amazon link because it supports their channel. So a lot of them had to open a new affilaite account to comply with new rules and all previous videos were demonetized because of account suspensions.
A lot of big podcasters get people to use their Amazon link for shopping. It set a floor for sponsor pricing, because they had little incentive to sell an ad for less than they could make by promoting the affiliate link to Amazon on their front page.
What even are the rules for how you talk about affiliate links? They seem to be pretty obtuse. Is saying to bookmark a problem? I know using the word 'supports' is a problem, as is mentioning where the money goes.
(Also I notice that the new chart says musical instruments are 6%. For electronic musical instruments -- digital keyboards, for instance -- does this mean the fee has gone up from 4%?)
They removed volume pricing. For instance, books used to start at 4% (I think), but it you sold even a nominal volume you quickly got a 6.5-7% commission.
Now it's a flat rate 4.5% in that category. Which amounts to about a 33% cut, because almost everyone was earning 6.5-7%.
This is likely to have a massive affect on the blog/article review ecosystem. Most of the review sites that exist today only do so because of amazon's fairly generous programs. I expect in aggregate there will be a shift in what lines of business people decide to get into, based on this.
Of course, there's not really a good, easy replacement for amazon affiliates, so people will still use it. But I expect people will deprecate affiliate marketing as an activity to some extent: this is a major change in the niche.
That's true for some categories, but the HN headline says electronics rates were cut in half, which I don't see when I'm comparing the two tables. Electronics were already excluded from volume pricing, and had a flat 4% rate under the existing fee structure. The only electronics subcategory in which I see fees being cut in half is for televisions, which were previously under the general electronics category (4%) and are now in their own category (2%). Most other electronics stayed the same, e.g. PC parts were already at 2.5% (and stayed there), videogame consoles were at 1% (and stayed there), and miscellaneous/other electronics were at 4% (and stayed there).
Previously it was (in general) 4% for up to 6 items, then 6% (or apparently higher) as the number of items sold increased. I don't recall whether quantities within an order impact that or not, it's possible that an order for 10 of item X would be counted as a single item for that calculation. Obviously the percentages could go quite a bit higher.
The "gutting" in this I'm sure is referring to the change from "electronics get 4-8.5% commission" to "electronics get 2.5% commission and never more than that." Having a huge range of other items also all capped at below 6% is also a huge blow to people who've been doing a lot of Amazon Affiliates work.
I've never really made much from it - probably less than $100 in any given year with one outlier when someone bought ten copies of Dragon Medical ($1800 each) after using one of my links. Still, this does give a good indication of whether it's worth putting together a focused product comparison site I've been contemplating. 6% or more on products with prices in the $100-1000 price range could make it worthwhile to build and maintain (content curation). 2.5% capped makes it a much less appealing proposition unless the site can have affiliate links to vendors other than Amazon, and I'm not sure if that's against their TOS.
The change from tiered rates based on volume to flat rates is fine with me. The bigger problem for many people will be that the rates are also being cut overall in many categories, at least for people doing non-trivial volume. For example, previously the affiliate payout for books was 6%+ if you sold at least 7 a month, while now it's a flat 4.5%.
As an Amazon affiliate who has done quite well with it, this is definitely a gutting.
But... if I'm being honest with myself, it also seems kind of reasonable. I think their original plan was pretty generous. I was kind of expecting this to happen at some point.
Was this this first you heard of the change? I'm not sure how old that link is, but to say on Feb 24th that your rates as of March 1 are going way down is a pretty tough pill to swallow.
If you aren't on a private contract with custom rates already, you aren't swimmin' with the sharks. Big affiliates heard about this a couple weeks ago, and likely had their contracts updated as a result.
Alternatively, great luck and timing for the Wirecutter team to sell to NYTimes before this happened.
For consumers, it's more likely heartbreaking, as we'll all likely have a tougher time getting high-quality review content like what The Wirecutter pushes out.
I wouldn't call all of Wirecutter high quality reviews. Some are high quality, most are medium, and some are low.
If you read a lot of their reviews you'll find many times they act as a meta review, basing the majority of their opinions on other reviews they read online. That's not high quality.
Almost all of their reviews give too much weight to price. When you say something mid range is the best without a price qualifier it's bordering on dishonest. Many of the things they call best are not the best, they're what they consider the best in the low to medium price range.
Do you really need someone telling you why it is a good product to buy? If you buy something from Amazon and it doesn't work in the way you want it to, return it. Watching reviews is a waste of time.
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The danger comes if you are not aware of the risks inherent in your own income. Sometimes it does make sense to let your income have some instability in it, and let someone else control it -- maybe it is a case like mine where it is small enough to not matter. Or maybe it is large enough that it is worth the risk. Just don't let yourself get in a situation where it is large enough that you are living on it, but not so large that the risks are acceptable. Because that is when changes like this will bite you.
I tried doing some FBA, but it felt super scammy. Research products that people are buying then just work the pay per click, give some products away for review, and try to "out manipulate" your competition. It is going to end badly for a lot of them. China is learning how to beat them at their own game. The guys that run seminars on this stuff... uggh... nuff said.
I'm surprised that you felt that selling things via FBA is scammy. I have a full-time job but I also own a business that (currently) grosses about $150K on Amazon. I can honestly say that I don't feel like we've out-manipulated anyone or have done anything but create a very competitive product that we're able to sell at a competitive price.
I agree that it quickly turns into a very painful race to the bottom when dozens of vendors are selling variations of the thing (e.g. silicone grill gloves or meat claws), but it's completely different when you're able to take the time to create a really great product. It's been a rewarding experience; I highly recommend it to anyone who doesn't mind answering the occasional support email and is completely committed to excellent customer service.
That's almost certainly a hard business to make money on - if you're doing common off-the-shelf items of any value, Amazon can simply add those themselves, and they're probably getting a better price on them with bulk purchases than anyone doing FBA can get. If it's direct sales of items you produce yourself then there are drawbacks if your items don't sell (high charges to ship them back to you apparently mean a lot of them end up being destroyed) or if you get targeted by scammers (e.g. NPR's Planet Money #724 "Cat Scam"[1], IIRC the "scam" part comes in with returns).
[1] http://www.npr.org/sections/money/2016/09/14/493810206/episo... and the Entrepreneur article it's based on https://www.entrepreneur.com/article/278622 in which people sell on eBay for 5-15% above the Amazon price, then simply order through Amazon and send as a gift. Returns go to Amazon and cost everyone except the drop shipper money.
I had a similar thought when I first heard about it, but then decided that I should give it a try as I am always dismissing things out of hands for believing that they are scams.
One year later I've quit my job (full stack developer), and sell full-time on Amazon and have never been happier. My current listings generate the majority of my income and require just a few hours a month to maintain.
For the rest of my time I do whatever I want.
It's not that things are inherently scammy, or unscammy. It's just things are or aren't easy based on your ability/work ethic, and the competition is or isn't steep based on how uninspired you are when competing.
The whole "cheap chinese knockoffs" thing is dismissive and frequently inaccurate. The great majority of things that people purchase from Walmart/Amazon/Target are manufactured in China, full stop. Some of it is cheap, yes, but no more or less than the ones by the "name brand" private labelers.
Awesome, I hope that works out.
I've been super concerned when I've seen friends buy products off Amazon for 2-4x the cost I find the same product on AliExpress for. It's ridiculously common to find identical hardware with a huge markup and a random logo stamped on it on Amazon.
Some of the stuff is total junk, other things are actually quite good - but you may as well just buy it from the source and not pay a middleman several times the cost.
A good friend of mine jumped into the "amazing opportunity" he was presented with. He paid them $5,000 for an FBA course. Long story short, he ends-up importing a bunch of kitchen crap from China, dropping tens of thousands of dollars.
As things progressed, many of the people on the same course did exactly the same. Very soon you had page after page on Amazon with poor bastards selling the same products from China under different brand names and packaging. I mean, exactly the same damn product.
Here's an example:
https://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3...
Funny as hell if it weren't so tragic because of how these folks are suffering. People are losing their asses on this stuff. They are killing each other paying incredible amounts for Amazon PPC advertising. Amazon is laughing all the way to the bank and these vendors are bleeding right and left selling the same products, from the same suppliers in China at minimal, if any, profit.
And then you have the Chinese suppliers who got wind of this and are doing two things:
First, they raise their prices. How stupid do you have to be as a supplier not to recognize something is going on when you get call after call from would-be entrepreneurs using exactly the same script to negotiate with you. These suppliers are nailing people for all they are worth.
Second, they are listing their own products on Amazon at the best possible prices because, well, they are the manufacturer!
And then, to make things even more interesting, people following these amazing formulas start importing stuff that runs right smack into intellectual property issues. So, the patent or trademark owner files with Amazon and the listings are suspended. The inventory now can't be sold and, to make matters worst, the vendor has to pay through their teeth to have it shipped out of Amazon. Ship it where? None of these people are real businesses with real warehouses and employees! So now they have a a few pallets full of crap they can't sell almost anywhere in their garage and living room. In some cases IP owners have gone as far as issuing C&D orders to these vendors.
The whole thing is absolutely surreal. Carnage is the first word that comes to mind when I think of the results. Sure, as always there are examples of folks who are just killing it because they got lucky, chose the right product or whatever. I'd say 95% of the folks who enter into these FBA "get rich quick, work from home, travel the world" schemes would have made more money if they took $5,000 and burned it.
As for my friend, some $35,000 later he quit and licked his wounds.
Not mentioned is the damage to consumers. These desperate, low capital, no-experience vendors are importing absolute crap from China. There are stores of phone chargers that go "poof" and other crap product issues right and left. And, if you dig deep enough, it will almost always land on some poor fucker who thought he or she was starting a business that would set them up for life.
Could be the scam of the century. The only people getting rich with consistency are those peddling the courses.
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It's a massive loss (~50%) for affiliates like Wirecutter that do mostly tech/electronics, and a huge boost for the luxury beauty category.
Current fees: https://web.archive.org/web/20170106214444im_/https://images...
Deleted Comment
They're there now. They have critical mass. They're the first place organic search for new stuff.
There's no sense in throwing money after sales they'd already get. They're better off using it as discount to get sales they wouldn't.
Ultimately Amazon does what every company does in some form or another as it scales--cut incentives, trim margins, increase on-site advertising, etc. It's one long life cycle game that plays out again and again.
I hope they have other retailers' affiliate links too, like Newegg.
and not seeing what is cut in half.
(Also I notice that the new chart says musical instruments are 6%. For electronic musical instruments -- digital keyboards, for instance -- does this mean the fee has gone up from 4%?)
Now it's a flat rate 4.5% in that category. Which amounts to about a 33% cut, because almost everyone was earning 6.5-7%.
This is likely to have a massive affect on the blog/article review ecosystem. Most of the review sites that exist today only do so because of amazon's fairly generous programs. I expect in aggregate there will be a shift in what lines of business people decide to get into, based on this.
Of course, there's not really a good, easy replacement for amazon affiliates, so people will still use it. But I expect people will deprecate affiliate marketing as an activity to some extent: this is a major change in the niche.
This: https://web.archive.org/web/20170106214433im_/https://images...
or this: https://affiliate-program.amazon.com/welcome/compensation
If they are going from a volume based approach to a margin based approach that is rational, and good for everyone.
(i.e. why payout more for 1000 rubber bands that makes them uncompetitive to sell, and you should pay out more for that high end tv).
The "gutting" in this I'm sure is referring to the change from "electronics get 4-8.5% commission" to "electronics get 2.5% commission and never more than that." Having a huge range of other items also all capped at below 6% is also a huge blow to people who've been doing a lot of Amazon Affiliates work.
I've never really made much from it - probably less than $100 in any given year with one outlier when someone bought ten copies of Dragon Medical ($1800 each) after using one of my links. Still, this does give a good indication of whether it's worth putting together a focused product comparison site I've been contemplating. 6% or more on products with prices in the $100-1000 price range could make it worthwhile to build and maintain (content curation). 2.5% capped makes it a much less appealing proposition unless the site can have affiliate links to vendors other than Amazon, and I'm not sure if that's against their TOS.
Deleted Comment
But... if I'm being honest with myself, it also seems kind of reasonable. I think their original plan was pretty generous. I was kind of expecting this to happen at some point.
https://www.google.com/search?q=amazon+affiliates&oq=amazon+...
Dead Comment
For consumers, it's more likely heartbreaking, as we'll all likely have a tougher time getting high-quality review content like what The Wirecutter pushes out.
If you read a lot of their reviews you'll find many times they act as a meta review, basing the majority of their opinions on other reviews they read online. That's not high quality.
Almost all of their reviews give too much weight to price. When you say something mid range is the best without a price qualifier it's bordering on dishonest. Many of the things they call best are not the best, they're what they consider the best in the low to medium price range.
I have seen products which are not superior quality but are ranked as #1. Generally best are third or below ranked products.