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Why is Amazon Trying to Squash Availability of Free Ebooks?

Amazon’s recent change to how it pays commission to affiliates linking to free ebooks likely signals a broader shift in strategy.

By Edward Nawotka, Editor-in-Chief

In today’s feature story “Did Amazon Just Kill a Golden Goose?,” George Burke, CEO of eBookDaily, argues that Amazon’s move to curtail affiliate commissions linked to free ebook downloads is big mistake. It is, essentially, penalizing the big traffic producers who generate brand loyalty and paid-for purchases. So why did they do it?

Well, for one, Amazon is likely paying out significant commissions to affiliates for non-book purchases. As Burke notes, there are tens of thousands of people who rely on such commissions to some degree as a source of income.

These people’s sites function as a form of free advertising, marketing and points-of-sale for Amazon — and drive tons of traffic. They are those who, at least in part, helped “make Amazon king.”

But another reason Burke proposes is that Amazon may be “actively trying to squash the availability to readers for free books.” Several recent changes signal as much. He posits that the main reason may be to curtail cannibalization of print books (which remain at the core of their business) and/or drive more readers to paid-for ebooks.

Ironically, as Burke notes, studies have demonstrated that the availability of free ebooks in fact drives more paid-for purchases.

Is there something more strategic behind Amazon’s move than saving money on commission fees? The structure of the arrangement would suggest so. Does this signal a shift in Amazon’s ebook marketing strategy and work with KDP authors, particularly now that the company has taken such a significant chunk in the marketplace? And what does this bode for the future?

Let us know what you think in the comments.

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  1. Posted February 28, 2013 at 6:31 am | Permalink

    Although many of Amazon’s decisions may seem reckless, bullish and without thought to how it might affect others, they rarely make a decision that is not calculated. It’s just that they never explain themselves. They keep everything in a cloud of mystery which leads to rumors and suspicions. It would behoove them to start communicating about what some of their plans are at least in a general way.

    They do have something up their sleeves, I’m sure. My thought is perhaps they’re going to start offering a service in which authors can pay them to promote their free eBooks directly to their list of curated Amazon customers. Although, they may not go as far as charging authors to be part of KDP, offering them the opportunity to pay to promote their free eBooks might be a nice chunk of change and quite frankly, I’d be willing to pay it.

  2. Posted February 28, 2013 at 9:53 am | Permalink

    Perhaps. Although apparent bad news in the short run, let ‘s “dwell in possibility” and see what emerges.

  3. Posted February 28, 2013 at 12:32 pm | Permalink

    The answer is pretty simple. You’re not seeing things from Amazon’s perspective.

    First, those free ebook sites don’t generate sales. They generate free ebook downloads and that’s not the same thing. Everyone is assuming that the free ebook sites generate the sales they take a commission on, but that is probably not true.

    Amazon doesn’t think so, and I tend to agree.

  4. Edward Nawotka
    Posted February 28, 2013 at 1:42 pm | Permalink

    @Nate, I think Amazon’s side of this is pretty clear, certainly. They have plenty of sunk costs related to hosting and delivering free ebooks — storage, distribution, management, customers service — that go well beyond merely paying out commissions. Not to mention the fact that, as you point out, the free ebook sites are indeed not using the affiliate system for their intended purpose. Gaming the system, as you say. (And who, honestly, isn’t trying to “game” Amazon as powerful as they are?) Yes, Amazon wants point, click and buy, not just point, click and download. From Amazon’s perspective: they are a business and generating revenue is their priority, plain and simple. If curtailing enthusiasm for free ebooks helps move them close to generating more revenue, however incrementally, it serves their purpose.

  5. Posted March 1, 2013 at 5:57 am | Permalink

    Has there ever been a business that scaled or was sustainable based on affiliate revenue alone (I mean a business other than a one-man lifestyle business?

    Also look at Twitter, Facebook and other huge platforms. Small policy changes can wipe out business that were build on a very narrow opportunity. It is like arbitrage in financial markets. It can be very profitable for short periods of time, but ultimately the opportunity dissapears as the anomaly corrects itself.

    In a related phenomenon: big platform owners (Microsoft, Twitter, Facebook, Google), displace 3rd party service providers with their own offering. Building a business on somebody’s else’s platform (and one platform alone !!) is always risky.

  6. Posted March 2, 2013 at 3:54 pm | Permalink

    Why is this being so widely trumpeted as “a bad thing”? I gave away 1.2 million books last year. It was the thing to do in 2012. Now it is 2013. Really, I am surprised that mini-epoch lasted as long as it did, since the digital tsunami strikes every six weeks or so.

    While it does hurt some people in the short term, anyone paying attention had lots of advance notice. At the end of 2012 Amazon was already sending out news of coming changes, primarily to large book sites. It was fairly well trickling through the indie underground–people with a business interest could have easily picked it up on their radar if they weren’t so sure that everything would remain the same (as if it ever has in the digital era).

    The smart ones will adapt and survive, and even thrive. Every disruption brings new opportunity.

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