Amazon Affiliate Commission Changes [LNIM130 Transcript]

This is the full transcript for Episode 130. For the show notes and audio, see LNIM130 Show Notes.

Drop-Shipping as a Business Model

One of the businesses that has always interested me is selling physical products online without ever touching inventory. The concept is called drop-shipping. A customer buys a product from your website, you keep a portion of the payment as profit, and you forward the rest to a supplier who ships the product directly to the customer.

The economics are straightforward. If you sell a product for $15 and your drop-shipper charges $5, you keep $10 without ever handling inventory, packing boxes, or managing warehouse space. This model has become increasingly viable because of the massive targeting capabilities of Facebook advertising and the availability of suppliers through platforms like AliExpress.

Amazon's New Fixed Commission Structure

Amazon made a significant change to their affiliate commission structure that affected many affiliate marketers. Previously, Amazon used a tiered commission model where the more items you sold in a month, the higher your commission percentage became. This rewarded high-volume affiliates.

The new structure replaced the variable tiers with fixed commission rates by product category. Your commission no longer increases based on how many items you sell. Instead, it depends entirely on what category the product falls into.

Winners and Losers

For super affiliates selling thousands of items per month, particularly in electronics and technology categories, this was a significant blow. Video game consoles dropped to just 1% commission. Television commissions fell from potentially 8% down to 2%.

On the other hand, categories like luxury beauty, furniture, and home improvement moved to a fixed 8% commission regardless of volume. For beginning affiliates in these categories who were only selling a few items per month, this was an instant raise.

Should You Still Use Amazon?

Yes. Amazon remains the easiest place to start in affiliate marketing. The application process is simple, every product imaginable is available, and the 24-hour cookie means you earn a commission on anything a visitor buys within a day of clicking your link, even if they buy something completely different from what you recommended.

The key adjustment is being more strategic about niche selection. Some product categories are no longer commercially viable for Amazon affiliates. A site that reviews televisions, for example, faces much tighter margins at 2% commission. But for many categories, especially those with the higher fixed rates, Amazon is actually a better choice now than before.

What to Do If Your Commissions Were Cut

1. Check competing affiliate programs. Retailers like Best Buy, Walmart, and Target have their own affiliate programs. Affiliate networks like Commission Junction and ShareASale may have merchants offering higher commissions in your product category.
2. Consider drop-shipping. If you are selling high volumes of a specific product and have strong search rankings, you might earn more by becoming an authorized retailer and drop-shipping the product yourself rather than earning a small affiliate commission.
3. Use PrettyLink or similar tools. The PrettyLink WordPress plugin lets you manage all your affiliate links from one place. If you need to switch from Amazon to another affiliate program, you change the link once instead of editing thousands of pages.
4. Explore alternative monetization. If commission rates have dropped below viable levels, consider whether display advertising through programs like AdSense might generate more revenue than affiliate links for your specific traffic and niche.

Why Amazon Made This Change

Amazon optimizes for its own profitability. Low-margin, high-cost-to-ship items like televisions likely had razor-thin margins already. Cutting affiliate commissions on those items reduces costs. Meanwhile, raising commissions on higher-margin categories like luxury beauty and home improvement incentivizes affiliates to drive traffic toward products that are more profitable for Amazon. The commission structure is designed to drive affiliate behavior toward Amazon's highest-margin products.

Key Takeaways

• Amazon replaced volume-based tiers with fixed category-based commission rates
• Some categories saw significant cuts while others received increases
• Amazon remains the best starting point for new affiliate marketers
• Use link management tools like PrettyLink so you can switch affiliate programs without editing every page
• Change is constant in internet business. The ability to adapt is what separates successful marketers from those who stall out
• If you have traffic, you can almost always find a way to monetize it

What's Changed Since This Episode

Mark recorded this episode in March 2017. Amazon has continued adjusting commission rates, most notably in April 2020 when rates were slashed again across multiple categories during the pandemic. Health and personal care dropped from 5% to 1%, and grocery from 5% to 1%. The trend has been toward lower commissions overall.

The Wirecutter was acquired by The New York Times in 2016 for approximately $30 million and has continued to grow as a major product review destination. It has diversified its revenue beyond Amazon affiliates, demonstrating the importance of not depending on a single affiliate program.

Amazon's 24-hour cookie window remains unchanged, but the ease of starting with Amazon Associates has tightened. New affiliates must generate qualifying sales within 180 days of signing up or their account is closed. The program remains accessible but less forgiving for beginners who are slow to generate traffic.

Resources Mentioned

• Amazon Associates Program
• PrettyLink — WordPress link management plugin
• Commission Junction (CJ)
• ShareASale
• The Wirecutter

Related Episodes

• LNIM129 — The Best Copywriting Formula
• LNIM131 — Demystifying UTM Parameters
• LNIM128 — 11 Essential Copywriting Tips

Listen and Subscribe

Listen to Late Night Internet Marketing on Apple Podcasts or subscribe at latenightim.com/internet-marketing-podcast/. Have a question for Mark? Call the digital recorder at 214-444-8655 or drop a comment below.