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Untangling the Commission Confusion: An Interview with Jeff Peterson, Advantage Director at Amazon

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Question: A big question has come up from PMA members about Amazon.com’s policies on commissions for sales stemming from Advantage members’ or Associates’ sites.

The Amazon.com rules state that commissions are “15% of Qualifying Revenues from the sale of each Individually Linked Book that, on the date of order, is listed in our catalog at 10-30% off the publisher’s list price and that is added to the customer’s Shopping Cart directly from the first page that results from following a Special Link to the Individually Linked Book.”

The complaint is that Amazon has made it impossible to link directly to the book.

When a visitor clicks on a link to Amazon from a publisher’s site, it doesn’t take you directly to the Amazon item page. Instead, it takes you to an intermediate page that says: “You clicked on [whatever the book title is], you might also be interested in these other titles.” If the customer clicks on the “add to shopping cart” option at that time–fine, the referring publisher gets the 15%. But most people don’t order then. They want to look at the customer reviews and the “look inside” junk, or they just want to look around.

So then the link becomes “indirect” and the commission shrinks to 5%.

Can you shed some light on this? What is the policy? What is the rationale?

Jeff: We do pay a 15% commission if the very first thing the customer does after linking from an Associate’s site is purchase the item they linked to. This has always been the case. The rationale is that if the Associate has done a really good job of selling the product, the customer will be ready to buy without needing any further information. They click from the Associate’s site to Amazon.com; they see the product they are interested in and they buy it.

If the customer is directed to Amazon.com from the Associate’s site but isn’t ready to buy, Amazon.com still has some selling to do. The customer may click around to get additional product information or want to comparison shop against similar items. In that case, we pay a 5% commission as long as the customer buys something. We pay 5% on everything they buy during that visit.

 

It’s definitely not “impossible” to link directly to a book. A standard link to a product will show that specific item at the top half of the page. If the customer buys with the first click, the Associate earns 15%. The bottom half of the page contains items which we know to be similar that customers might also find interesting.

An associate can choose to eliminate the bottom half with the tools we provide [see “Associates Central,” the members-only site, which is rich in tools and tips], but the risk is that the customer doesn’t buy the product at all in which case the commission is 0. Associates could make more money from several sales at 5% than from only one sale at 15%. It’s completely up to the Associate to figure out what is best for them.

 

Pat: Can a publisher participate in both the Associates and the Advantage programs?

Jeff: Absolutely. In fact, if you’re an Advantage member and you’re not in the Associates program, you’re not making the most out of your relationship with Amazon.com. We encourage all Advantage members to join Associates. And Associates who are publishers are always welcome in Advantage as well.

Pat: Is it correct to say that Advantage focuses on the publisher and products, offering better visibility (the title appears more often and more prominently on searches), qualifying the title for subject pages, and providing faster fulfillment?

Jeff: Yes. I would say that the key benefit of Advantage is 24-hour availability of your product on our site.

Pat: And what Associates get is a set of tools for setting up Amazon.com connections on own site, essentially making Amazon.com the distributor for the publisher, whose shop is its own site, right? An Associate publisher actually becomes a book vendor?

Jeff: Not exactly. Associates do not have to be publishers. No distribution relationship is required. Anyone with a Web site can link to Amazon.com and earn commissions if they help sell a product. But publishers make great Associates–consumers often come to their sites to learn about a particular title because they’re very interested in actually buying it.

Pat: Amazon.com has been a great boon to the small presses and independent publishers. It’s vastly enlarged our distribution range and we’re very appreciative of this force in the marketplace. And the Associates program, allowing publishers to earn commissions on referrals from their sites, was brilliant. But the helpful innovations have been confusing at times.

Can you sum up the current rules briefly?

Jeff: The details are lengthy but h=èY26#146;s the new pricing structure, as of October 1, 2002. It will be evaluated this quarter.

Associates earn referral fees when a visitor follows a link from the Associate site to Amazon.com and makes a purchase. The link can be to an individual title, a search results page, or to the Amazon.com Home Page.

Referral fees are calculated from the sale price, not the list price, for each qualifying item, and they are based on Qualifying Revenues, which are revenues derived by us from our sales of Qualifying Products, excluding costs for shipping, handling, gift-wrapping, taxes, service charges, credit card processing fees, returns, and bad debt.

The current referral fee schedule is:

(a) 15% of Qualifying Revenues from the sale of each Individually Linked Book that, on the date of order, is listed in our catalog at 10-30% off the publisher’s list price and that is added to the customer’s Shopping Cart directly from the first page that results from following a Special Link to the Individually Linked Book. Only books can qualify as “Individually Linked Books”; no other products are eligible.

(b) 5% of Qualifying Revenues from the sale of each Product sold by ToysRUs.com, BabiesRUs.com, and Imaginarium.com

(c) 2.5% of Qualifying Revenues for all other Qualifying Products sold by third parties

(d) a minimum of 5% and a maximum of 8% of Qualifying Revenues for all other Qualifying Products sold by us, including Individually Linked Books that, on the date of order, are listed in our catalog at the publisher’s list price (such as special order books) or at a deep discount of more than 30% off the publisher’s list price; e-books (in any format); and Qualifying Products other than books (e.g., CDs, DVDs, VHS tapes, and so on), which our Agreement calls “Specified Qualifying Products.”

The specific referral fees payable for those Specified Qualifying Products depend upon the total number sold during sessions initiated through Special Links on your site during each calendar quarter, in accordance with the schedule below.

 

 

Total Qualifying Product Units

Sold in Quarter

Referral Fees for

Specified Qualifying Products

Products Sold Per Quarter Referral Fee Percentage

1-25 5.00%

26-100 5.50%

101-500 6.00%

501-3,500 6.50%

3,501-15,000 7.00%

15,001-175,000 7.50%

175,001+ units 8.00%

Referral fees for consumer electronics products and consumer software are limited to a maximum of $10 per item, and referral fees for computers are limited to a maximum of $50 per item, regardless of the Qualifying Revenues derived from the sale of any such item.

Anyone can get all the details at

http://www.Amazon.com/advantage and

http://www.Amazon.com/associates.

 

Pat Bell is the Owner of Cat’s-paw Press, a PMA board member, and the author of “The Prepublishing Handbook–What you should know before you publish your first book.”

 

 

[sidebar]

Evolution at Amazon

Jeff Bezos caused a huge change in bookselling when he launched Amazon.com’s online bookstore in July 1995 and made it possible for a person to hunt for any book listed in Books In Print.

From its early days, Amazon.com has ordered from wholesalers and distributors as well as directly from publishers, and publishers originally sold books to them under much the same terms as to bricks and mortar stores.

A new concept was launched in 1996–the idea of publishers linking their sites to Amazon.com, creating what amounts to satellite stores. This innovative idea–publishers setting up their own online bookstores–was astounding and popular.

Here are the key similarities and differences between today’s Associates and Advantage Programs.

 

The Associates Program

An Amazon Associate features a book on its site and creates a link to Amazon.com for the visitor to use to purchase the book. Amazon tracks these buys and uses them as it creates ratings (which both authors and publishers frequently track like hawks). The Associate gets a commission on the sale of the book. If the publisher’s distributor or wholesaler is providing books, the commission is a little extra for the publisher.

The publisher can cover and link books from other companies–not just its own.

More than 600,000 sites have become Associates, and other online booksellers have now imitated the program.

With this arrangement, the publishers’ relationship with Amazon continues to be much the same as the relationship with bricks and mortar stores.
The Advantage Program

Advantage–which was launched in 1997 and now serves thousands of publishers, authors, musicians, labels, filmmakers, and producers–changed that relationship, making it more like another one that’s familiar, the relationship between publishers and wholesalers.

Advantage entails a 55% discount and publisher-paid shipping, with books actually in inventory so they can be “usually shipped within 24 hours,” and titles classified by subject words and classifications assigned by Amazon specialists. (For full details, go to www.amazon.com/exec/obidos/subst/partners/direct/book-benefits.html/102-5972095-0377703.)

– Pat Bell

 

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