Amazon's Gut Shot to Affiliates

Following up on yesterday's post, There is a great deal of buzz about the impact of Amazon's decision to ban affiliates from PPC advertising. Jeff Molander, argues that in this economy, retailers are no longer willing to accept on faith the value of affiliates. In the past the questions of whether affiliates generated incremental orders, or simply acted as a tax on orders that would have been placed anyway could be shrugged off. Today, those questions cannot be ignored. Dick Mangina, made the case in his commentary that click arbitrage in affiliate marketing for Amazon essentially died in 2006, as competition in PPC drove up the CPCs and Amazon lowered its commissions. It's no longer even possible for affiliates to play this game. Indeed, as we at RKG have started studying Multichannel Interactions, we find very interesting trends in the data, which point to the conclusion Amazon reached: the bulk of the orders aren't coming from PPC arbitrage on competitive keyword searches, they're coming from trademark squatting. Conversion rates of affiliate traffic are huge -- bigger than trademark search -- indicating not that the traffic is well qualified, but that the traffic is essentially already standing in line to buy from you. The coupon + the commission is simply a tax on sales that retailers shouldn't pay. This has been our position for a long time. A well run PPC program is a more efficient use of marketing dollars than letting affiliates "do PPC for you" -- even if they don't squat on your brand. And, they do squat on your brand and have to be monitored. This monitoring is more and more complicated because the scammers have gotten quite sophisticated in targeting ads to geographies other than the corporate headquarters, doing it at night, etc. Now, by prohibiting all PPC activities by its affiliates, Amazon can effectively squash the brand theft as well by enlisting the engines help in protecting its trademarks. If no one is allowed to use "Amazon" in their ad copy, it becomes very easy to police. Smart, very smart. This is a gutsy move by Amazon that requires the C-level executives to really understand the channel. Too often the marketing analyst who raises these points is shouted down by the corner office folks who see nothing but the revenue tracked to affiliates. "What? Are you nuts? Affiliates are our MOST profitable marketing program!" It takes nerve to pull the plug and watch those sales migrate to organic search, brand ppc and "untracked", but migrate they will. We'll share more of the data we've seen over the next couple of months.
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