Report: Amazon pulls third-party vendors from affiliate program

Dive Brief:

Amazon cut third-party vendors including Skimlinks, Sovrn and CJ Affiliate from its affiliate program, AdExchange reported citing unnamed sources.
Since the beginning of April, these affiliates will not earn a commission on purchases made as a result of traffic they sent to Amazon. Previously, select vendors received a cut of the total order amount, not just the percentage of the item that they added to their cart from the affiliate, the report explained.
Amazon's affiliate program will maintain its direct relationships with thousands of digital publishers and supply-side ad exchange Transparent Ad Marketplace (TAM).

Dive Insight:

Amazon's move to trim down its affiliate marketing program could be a cost-cutting measure in response to the COVID-19 pandemic to help the e-commerce giant manage programs that have a reputation as being prone to high levels of fraud or over-collection of commission on the actual sale.

As AdExchanger notes, third-party affiliates can earn a larger percentage of a final sale than simply a commission on a single item. Items sold via affiliates generate a different commission depending on the category. Beauty products can earn a 10% commission, while a video game brings in less than 5%. However, if a customer adds a $5 eyeshadow to a cart that already has $500 worth of items in it, that affiliate that drove the shopper to purchase the eyeshadow could earn $50.

Amazon appears to be tightening up this business model to keep more profits from its sales, especially as consumers search the platform for new products after clicking links from external sources. By cutting off these third-party affiliates, Amazon could increase its own profit margins and potentially increase returns for publishers that send traffic directly to the e-commerce giant.

The move follows news last week that Walmart cut its influencer affiliate programs with social commerce site MagicLinks and e-commerce giant Rakuten. Additionally, retailers Macy's, Patagonia and Victoria's Secret have taken similar steps, per a recent Business Insider report.

Publishers without direct relationships to Amazon will likely take a hit if the pullback on affiliate marketing continues. These developments come as publishers are already hammered on the revenue side as marketers cut ad spend and block ads from running on coronavirus-related stories.