Amazon Associates Arbitrage: Amazon’s Own Success May Be Hurting Themselves

If you’re reading this post, then you’re probably already aware of Amazon.com and their dominating marketshare in eCommerce. Amazon sells nearly anything you can think of that can be shipped, for the some of the lowest prices available anywhere. Some products, such as digital cables, net Amazon $5-10 per transaction. Other products, like snow shovels, are loss leading products (a net negative $20-30), where Amazon actually loses money but wins mindshare amongst their customer base in the long run. But one fact that may be less well known is that any tech-savvy user can earn money by promoting any product available for sale on the Amazon website. This program is known as the Amazon Associates program.

Members of Amazon Associates earn commission when they refer a user to Amazon who ends up buying something on the site within the next 24 hours. The commission structure depends on the product category, and scales with volume, which fairly rewards the associate as they grow their traffic. So, for associates big and small, for example, this means they can start earning extra income from a book that they are trying to promote, or larger networks¬†can¬†offer discounts to their users in exchange for simply purchasing their products via Amazon.com. Or relatively obscure search engines such as DuckDuckGo can make a lot of money without implementing many traditional ads. While Amazon Associates undoubtedly helped Amazon grow its revenues and its traffic through the mid-2000’s, I am writing this post to provide a different perspective on how it might be losing them a lot of money in transactions where their margins are already thin.

Now, let’s step aside from the traditional small and big site Amazon Associates mentality. Instead let’s think about Amazon’s incentive structure more deeply from the perspective of “How much can I earn per click?”, regardless of where my traffic comes from? Let’s do some simple math with two assumptions: (1) the average order total on Amazon is $20 and (2) the average commission per order is $1.

Number of Clicks Conversion Rate Orders Comission Earnings Per Click
1000 1% 10 $10.00 $0.01
1000 2% 20 $20.00 $0.02
1000 3% 30 $30.00 $0.03
1000 4% 40 $40.00 $0.04
1000 5% 50 $50.00 $0.05

Now, if you were to take a random sample of 1,000 Americans, what percentage of them are likely to have ordered something from Amazon in the past 24 hours? In 2006, it may have been less than 1%, but since the introduction of Amazon Prime, that number is quickly on the rise, to a number likely over 2-3%. For certain segments of the population, such as upper middle class families and “techies”, this percentage is likely to be even higher around 5-6%, resulting in potential earnings of over $0.05 per click. The close reader may call my bluff here, but I assure you this data is not far off, considering around 15% of the American population is subscribed to Prime.

Now, where is the opportunity? The opportunity lies in being able to find quality traffic for less than $0.03 – $0.04 CPC elsewhere on the web, and then divert it directly to Amazon. Let me explain with a simple example:

zimbabwe

 

 

Above is a Reddit Ad for Zimbabwean dollars, with my unique Amazon Associates link being the destination URL. You may be surprised to learn that you can buy foreign currency on Amazon. But it’s true! And an advertisement for money… who doesn’t want money? This ad is a recipe for a high click through rate. Take a look at the results from a campaign I ran earlier this month on Reddit, targeting people interested in technology and who live in the U.K.:

Screen Shot 2016-03-31 at 10.37.47 PM

$0.02 per click! Amazingly cheap clicks! Why? Reddit is a social site with low purchase intent. But in the context of Amazon, this is not very important, so long as enough of those clicks buy — anything — on Amazon in the next 24 hours. Out of habit in 2016, as mentioned above, at least 4-5% of these clicks are likely to purchase something from Amazon within the 24 hour cookie timeframe. The results? Check it out:

Screen Shot 2016-03-31 at 10.42.55 PM

 

170 items ordered, which is around a 3.5% conversion rate from the originating 4,800 clicks. Total earnings: about $175 USD. Net profit: $75. Not bad for less than ten minutes of work!

This is too good to be true, you must ask? Maybe. Reddit (in addition to Google and others) no longer allows affiliate ads on their ads platform, so it’s unlikely that you’ll be able to sell Amazon products on their platform again. But do you know of another place on the web where you can get clicks for under $0.05, and from people who buy things on Amazon? Give it a shot! Best of all, your conversion rate will only continue to increase along with Amazon’s overall success. You might be surprised to see your results.

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John Marbach

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31

03 2016
  • Jim Smith

    Boostpforamazon.com has daily traffic campaigns for $1 … 30 clicks