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A couple of years ago, I wrote about the "Search Engine Tug of War" between merchants and affiliates, and the basics haven't changed much since I wrote that article. But more and more companies running affiliate marketing programs are changing their policies on paid search. Recently, the granddaddy of all affiliate marketing programs, Amazon Associates, announced that they are curtailing some of their payments for paid search.

The basis for this battle is quite simple. Merchants want the extra sales that affiliates provide, but they want them at the lowest possible cost, provoking a constant skirmish over what practices add new sales versus raise the price for sales that would have happened anyway.

Some merchants, including Amazon, have long prohibited affiliates from bidding on the merchant's brand name. The theory behind this practice is that those searchers already want to buy from the merchant, so the affiliate provides no value by intercepting that traffic and then graciously feeding it to the merchant. Had the middleman not been present, the theory goes that the searcher would have clicked on the merchant directly, saving the merchant those pesky affiliate fees.

But, as I pointed out in my article from 2006, some merchants found that removing their affiliates from the mix merely provided competitors with "shelf space" that stole the sales completely. Some merchants prefer to pay the affiliate fees to freeze out competitors rather than partners.

Amazon's most recent change in policy is on a different issue--directing searchers to Amazon's own pages from the paid search ad. Many merchants have always prohibited this practice, believing that the ability to bid and write ad copy alone is not worth a commission, but Amazon until now had been lenient.

Amazon now insists that affiliates direct searchers to ads on their own site and then direct to Amazon, which changes the equation in several ways:

  • Affiliates must invest in real content. No longer can affiliates merely write ad copy. They'll be forced to host pages for every item that they wish to collect a commission for.
  • Searchers might abandon affiliate pages. Today, a searcher clicks on the affiliate ad and is taken to an Amazon page where they can buy. In the future, they'll go to an affiliate page where they must click again to get to the Amazon page. Fewer will convert by this route. Some will back up to the search results page and click on the actual Amazon link and convert without any commission being paid to an affiliate.
  • Bids will be lowered. Because conversions are lowered for affiliates, they will be able to bid less, lowering Amazon's paid search costs. Amazon can lower its bid and remain #1 for its paid search keywords.

Amazon took its sweet time announcing this practice--one which other merchants did years ago--so you can bet that they spent a lot of time agonizing over the numbers to see whether this helped or hurt their marketing. Now that Amazon has taken this stance, it's less likely that other merchants will be lenient on this practice.

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April 14, 2009





Mike is an expert in search marketing, search technology, social media, publishing, text analytics, and web metrics, who regularly makes speaking appearances.

Mike's previous appearances include Text Analytics World, Rutgers Business School, SEMRush webinar, ClickZ Live.

Mike also founded and writes for Biznology, is the co-author of Outside-In Marketing (with James Mathewson) and the best-selling Search Engine Marketing, Inc. (now in its 3rd edition, and sole author of Do It Wrong Quickly, named by the Miami Herald as one of the 11 best business books of 2007.






Comments(11)

Clearly, the people who are going to be the most affected are the affiliates who tend to market only through PPC without owning a site of their own.

What I'm curious to know is how this news will affect the number of people interested to join the Amazon program now, and how will abandon it too...

I don't usually market much this kind of things myself, because I have quality content sites for it, but just knowing about this kind of restrictions does make me somehow uneasy about investing more time in promoting this kind of products/company.

The merchants also do not want to have to compete with it's own affiliates if they are using PPC as well.

I wonder if there's a slippery slope here. What stops an affiliate from cloning the Amazon page--that seems morally equivalent to an interstitial page but works around the restriction. Or is that prohibited elsewhere?

If your goal is to grow your business, there are several ways to make sure you are getting the best bang for your marketing buck. Rather than trying to be known for everything you do for your customers focus your marketing using these steps:

1. Pick a single topic - Yes, I know you're expert at a lot of things. Even so, for a 90-day period, select a single topic to use as the foundation for your marketing activities.

2. Make that topic the first thing you use when introducing yourself in networking settings.

3. Send a quick survey to your customers and prospects asking them what their "Single Biggest Question Is" about that topic.

4. Use that topic to write 12 articles. You can put those articles one per week on your blog and web site, submit them to article directories, and email them to your list of customers and prospects.

5. Offer to give a 20-minute talk on that topic to your best referral sources. This might mean a brown bag lunch talk at law firms, accounting firms, banks, professional association meetings and so on.

Great advice, Bakri. It inspired me to write a blog post about your point to make a larger point. We need to constantly ask ourselves what we really do for our customers. (http://www.mikemoran.com/biznology/archives/2009/04/what_do_you_do_for_your_custom.html)

Maybe there is a revenue story behind Amazon's decision that makes sense for them in a shrinking economy. Maybe they feel like squeezing every penny out of each sale is more important than growing sales.

It's hard to say without knowing what went on behind closed doors.

I have always felt that paid search ads were not clicked on nearly enough for the amount of money you have to spend on them. that's why I love the free, organic placement, it's free for one, and second of all I thingk more people click those links than the paid ads.

Chris

I do understand the situation. In todays life facing recession, I believe all businesses are cutting cost and they wanted to spend as little as possible. Just a bad news for their affiliates :-)

I would love to see the amazon numbers. I doubt they even really know the bottom line on affiliates.

Pro: Amazon doesn't have time to market and advetise every product they offer... affiliates have filled the gap.

Con: the affiliates are not providing value to the customers and are down right annoying.

As an Amazon affiliate, I have always gone with SEO to get visitors to my site, then convert them with my content. Actually I believe it is better for my business then sending them directly to the merchant. If they join my newsletter, I can get repeat sales. I figured this out long ago: the internet is about content. Ask yourself this, why do you go to Google and key in "cover letter"? Are you looking for (free) information on how to write a cover letter or are you looking to buy a book on it?

Companies want to drastically cut costs, but in this case there is a risk of loosing decent part of the profit, which brings its affiliates.

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Search Engine Guide > Mike Moran > The battle over search between merchants and affiliates