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Did Amazon Just Kill a Golden Goose?

Why would Amazon want to penalize the big traffic makers that generate brand loyalty and purchase revenue?

Illustration by L. Leslie Brooke, from The Golden Goose Book, Frederick Warne & Co., Ltd. 1905 (Courtesy of Project Gutenberg)

Editorial by George Burke, CEO, eBookDaily.com

On Friday, Feb 21st, Amazon alarmingly updated their Associates Program structure to wipe out affiliate commission payouts to sites listing free Kindle books as the primary driver of user traffic to Amazon.com, causing many Kindle-focused book launch, review, and discovery sites to rethink their business models.

Starting March 1, 2013, Associates who we determine are promoting and meet both conditions below for a given month will not be eligible for any advertising fees for that month within the Amazon Associates Program…

1. At least 80% of all Kindle eBooks ordered and downloaded during Sessions attributed to your Special Links are free Kindle eBooks

2. 20,000 or more free Kindle eBooks are ordered and downloaded during Sessions attributed to your Special Links

And ironically, just two months ago, I launched free Kindle books alert service eBookDaily.com to rewards readers with Amazon gift cards for checking out the freebies each day.  In the first month alone, the site gained 8,000 members, generating 175,000 clicks to Amazon. Massive traffic for Amazon from such a little site, yet I’ll be forced to change my business model or shut down, like some site owners say they’ll do.

So why kill the very source of hundreds of thousands of users browsing and shopping Amazon? Why hinder the sites that have strengthened the Kindle brand through the clicks of loyal ebook readers?

“Amazon may be actively trying to squash the availability to readers of free books,” writes Burke.

The obvious answer is that commission on free Kindle book offers is paid when users purchase goods that were never advertised by the affiliate. Millions of Americans buy all sorts of products on Amazon every day — iPod chargers, toasters, shoelaces, DVDs, deodorant, barbecue grills, TV episodes, milk, and hair regrowth pills — and don’t need an affiliate to convince them to buy. I knew this and built eBookDaily to point readers to free Kindle books through my affiliate links so I can capture the commission on all that other stuff they’ll buy today.

So Amazon’s new regulations will close the gap on earning indirect commission through pushing free ebooks to get users to click.

Can We Save Our Commission?

George Burke, CEO, eBookDaily

Amazon intends the new 80/20 free-to-paid-book split to convince sites like eBookDaily to feature at least 1 paid book for every 4 free books. Doable, but Smashwords recently reported that they average 100 free downloads for every paid book. At this rate, free book sites will no longer be “free book sites.” Theoretically, even removing free books entirely could trigger a problem. Amazon matches up anything a shopper adds to cart within 24 hours to the affiliate, regardless of the affiliate advertising those products; so a user could indirectly download a hundred free books attributed to the affiliate even though the affiliate only advertised a paid book. Affiliates simply have no control over users after they leave their site.

What’s worse is that the 20,000 free book downloads leaves eBookDaily no room to grow. If 75% of my 13,000 members download 2 free books each, eBookDaily will have crossed the threshold. And even though Amazon is offering new reporting to detail the number of downloads, their affiliate reports are always a day or more behind. This will require free book sites to remove the affiliate tag from book links after some not-yet-determined number of downloads to not risk losing commission. Basically, eBookDaily is capped at today’s affiliate earnings; never earning more and always at risk of losing it all.

What About Abandoning the Amazon Associates Program Altogether?

Sure, there are a few other affiliate programs advertising ebooks. Smashwords’ commission starts at 11% and goes all the way to 80%! Comparing that to Amazon’s 4% (topping out at 8.5%) sounds pretty tempting. None of the regulations, plus Smashwords encourages free book downloads.

There’s also B&N’s affiliate program, but last year they eliminated affiliate commission paid out on NOOK books and other “digital products.”

But who are we kidding!? B&N largely sells books and media. Smashwords only sells ebooks. Sites like mine only work because users are clicking through and buying everything under the sun at Amazon — the world’s marketplace — not just books.

Is Amazon Really Curtailing Cannibalization of Print?

Sure this will instantly save Amazon hundreds of thousands — if not millions — in commission payouts to free book listing sites. But is this the real reason?

Is it possible that Amazon isn’t trying to save a few bucks on commission payouts, but rather is taking action against a trend of free books cannibalizing paid books?

Over the last year, incremental changes have been made to Amazon’s KDP Select policy. The “Great Algorithm Change” of March 2012 reduced the ranking and recommendations of free Kindle books to be a tenth of that of paid books, likely to minimize the number of free books that were automatically recommended to readers on product pages. Then Amazon began hiding the Top 100 Free Kindle Bestsellers list behind a separate tab on category pages.

Considering this trend, it would make sense for Amazon to undermine the very source of “free book” hungry readers — the listing sites themselves. Take away a website’s revenue source, and you’ll either force a website to change its business model or disappear.

If this is truly the reason, it is far more alarming to consider that Amazon may be actively trying to squash the availability to readers of free books.

Yet, Peter Hildick-Smith, the book industry stats guru of Codex Group has private studies revealing that free book lists are the biggest driver of paid book sales.

Mass Exodus of KDP Select Authors?

Many authors in the KDP Select program have grown fond of the ability to offer their books for free and see a spike in full price sales upon return to paid, all without the need to market or advertise. Free Kindle book listing sites might push their audience to a book, giving an author the exposure (and downloads) needed to propel the book into the visibility and prestige of the Top 100 Free Kindle Bestsellers list. Take the potential for that free exposure away by closing the sites linking to it and authors who signed up for KDP Select may just jump ship, seeing little value in offering books for free without the ability to find them.

The Kindle brand has dominated ebooks sales for many years, it now owns (by some estimates) a minimum of 45% of the ebook market, thanks in part to the affiliates who embraced Amazon’s strong ebook affiliate program, creating some very innovative sites and services promoting Kindle books (both free and paid). But it’s not just savvy entrepreneurs who are responsible. Book reviewers, journalists, book bloggers and even mommy bloggers (2 million affiliates) rely on Amazon Associate income, so they create hundreds of millions of links to Kindle books, resulting in a ubiquitous Kindle presence on the web. Consumers will make the logical choice of Kindle over other brands given the overwhelming Kindle references.

Amazon relies on affiliates like me to continue pushing the Kindle brand and funnel web traffic into Amazon every day. While eBookDaily’s primary revenue structure relies on members to purchase paid books and goods, I bring the user to Amazon.com for those purchases. Without clicking on eBookDaily’s free book link to Amazon.com, the person might never have visited Amazon and instead shopped at competitor websites… Why would Amazon want to penalize the big traffic makers that generate brand loyalty and purchase revenue?

George Burke is the Founder/CEO of a trio of book industry sites: “Netflix-style” book rental BookSwim.com, Kindle/Nook lending/swapping eBookFling.com, and Free Kindle ebook alerts: eBookDaily.com.

DISCUSS: Why is Amazon Trying to Squash Availability of Free Ebooks?

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9 Comments

  1. Posted February 28, 2013 at 5:25 am | Permalink

    “If this is truly the reason, it is far more alarming to consider that Amazon may be actively trying to squash the availability to readers of free books.”

    Amazon isn’t a library, they are a (, in this case,) bookseller.
    I don’t like Amazon at all, and I hope all their book business disappears, and preferably that they go to hell. -But in this case I agree with what they are doing. They are already selling their Kindles at cost because they expect to make the money back on books. Of course they have to make money somewhere if they want to be in the e-book business.
    But I find it ironic that the same Amazon that created the craving for free, and cheap, books (, to kill their competition, ) is now feeling the need to stop what is essentially the core of their book related business model because it hurts their bottom line. -That’s Karma for you!

  2. Posted February 28, 2013 at 9:24 am | Permalink

    Fascinating information on an aspect of the business I knew little about – other than taking advantage of free book offers and incorporating a freebie offer into the marketing plan for my first novel to drive sales.

  3. Posted February 28, 2013 at 10:05 am | Permalink

    Thank you for sharing this illuminating primer on the ebook publishing industry and Amazon’s latest moves. Naturally, I hope you continued success in your publishing adventures !

  4. bowerbird
    Posted February 28, 2013 at 7:53 pm | Permalink

    ok, you were gaming their system,
    and they put an end to you. so what?

    -bowerbird

  5. Posted March 3, 2013 at 7:32 pm | Permalink

    I own a site that has been promoting free books. Due to the new Amazon restrictions, I changed the way I have been posting the free books, posting much less, and adding in more paid book posts.

    Since that change, I have only sold 1/10th the number of paid books each day that I normally would. So I sold 10x the number of paid books, when I posted free books more often!

  6. Posted March 12, 2013 at 5:17 am | Permalink

    It was always going to happen. I’d say it was part of the marketing dynamic. There was never much profit in the Kindle device. Many people bought Kindles because of the number of books available for free. Amazon made no money on the Kindle and no money from the content. Now’s the time to reap what has been sown.

    As a writer I welcome any move by Amazon to stem the flow of free books. A huge proportion of self-published authors are middle class and or retired people. The majority of the them have the time write – not necessarily the talent. These people just “want to be read”. The result is a SP market awash with free and 99 cent manuscripts of varying qualities. Subsequently, it is impossible to for a self-published author to sell an e-book at a reasonable price.

  7. Ben Karlin
    Posted December 8, 2013 at 10:53 am | Permalink

    The free and paid book markets are very different animals, at least as far as I understand them. Among the many free books there have been almost none I would buy. In a brick-and-mortar book store it is unusual to head straight to a title, directly to a register, and out. In the same way the free books model allowed me to ‘browse the shelves’ and read a few pages of a paperback. There may be times an author engaged me to the point of buying the book or looking for other of their work and buying it but in most cases not. None of this has any impact on books I had intended to purchase initially.

    Of course, this has even less impact on the greatest purveyor of free books, public libraries. As a person who is generally homebound, however, the free books downloads through online marketers has been more convenient than through my library. Pushing me toward the library stacks instead of their shelves, Amazon does ultimately cut the chance of their making a sale.

  8. Posted December 26, 2013 at 7:38 am | Permalink

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  9. Miss_January
    Posted January 1, 2014 at 7:36 pm | Permalink

    Forgive me, but I am new to the ebook market. I just found out that Amazon is offering free ebooks. I also notice that alot of the books are only 15-20 pages. I am certainly missing the point of the author posting these books online for free. Is it all just a marketing gimmick of some kind?

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