Amazon May Have Changed Paid Ads Forever
Updated: Oct 13, 2021
Amazon has rolled out a new program that sellers have been clamoring for years at the idea of. Amazon’s new program, Brand Referral Bonus, is a program designed to incentivize brands to drive traffic to Amazon via paid ads by, “Receiving bonuses that average 10% of sales you have driven to Amazon.” In short, Amazon will credit back on average 10% of the 15% referral fee if the traffic was driven to Amazon through a seller’s own paid ads. Additionally, Amazon also will pay sellers the bonus if the customer buys within 14 days of their initial ad click -- making long term brand awareness marketing more possible. Although 10% appears regularly, the actual percentage bonus varies based on category ranging from 3% to 30%. Most mainstream categories round out to 10%, and the bonus is paid 2 months after the sale. Amazon also states you will get a commission on, “promoted products and additional products purchased from your brand”, meaning you will even get a bonus if a customer doesn’t buy the particular item from your brand you advertised to them; an additional nice touch. Amazon notes this program will only be for brands enrolled in Brand Registry, and directs non brand owners to their Amazon Affiliate program. The 10% bonus on sales could make a huge impact for marketers. It’s possible to imagine whole marketing agencies solely dedicated to setting this program up and simply taking a small 1-2% portion of the credit. Marketers were already running ads to Amazon at some capacity, now they have an even wider margin for success. For example, a Facebook campaign that runs at an efficiency of 10% cost of sale becomes essentially free. This 10% bonus means that brands may be able to run ads to Amazon more profitably than they could even run to their own website; potentially part of Amazon’s strategy. A product with a low margin typically was out of the question for paid ads directed to Amazon. This might change with a bonus of 10% being offered. This program allows Amazon to compete head-to-head at a 5% fee compared to Shopify’s 2.9% + 30¢ transaction fee. For many smaller, lower cost items, the savings on Amazon FBA fulfillment make this an overwhelming win for Amazon. Not everyone is thrilled about the program. Having been burned in the past, some sellers are skeptical that the fees may eventually drop and this initial 10% is just an introductory bonus to get brands signed up. Additionally, others fear that running paid ads outside of Amazon to the platform will become an even larger part of Amazon's algorithm, favoring those who direct traffic. Amazon is already become a pay-to-play platform in many ways, and it would be worrisome if this additionally extended into outside of Amazon ads. Driving traffic from Facebook has always been a cheaper strategy than attempting to win Amazon placement for pricey keywords. The concern would be with ore sellers joining the program, the cost of keywords spills over driving Facebook costs higher. I’m sure Facebook and Google love this program. Further, if the new customer ends up loving your product, you do not continue to get the 10% bonus on any repeat orders. Thus, sellers are left constantly chasing new customers in search for the bonus. As with most Amazon programs, this is still very new and how it is implemented will still remain to be seen. Not all Amazon programs stay for the long haul, and we have seen many come and go. This feels like an enormous benefit that doesn’t seem to be acquiring the same level of attention a decision of this magnitude would. Imagine if stock traders instantly got an extra 10% margin of error on all their trades. That would be huge news. The skepticism and uncertainty will remain until a few sellers begin to have success on the program. With a 2-month payment plan, it’s unlikely any sellers have even began to receive payments back yet, so the program is in its infancy. In a few years, we may look back and say this program quietly changed paid ads on the internet -- or we may laugh at another Amazon program that was absorbed and abolished. Only time will tell the impact of this little 10% “bonus”. Alexander V. Johnson, Mixt Solutions. Mixt Solutions is an online sales company specializing in Amazon based consulting. They are a top 500 Amazon Seller worldwide doing over 1,000,000 transactions on Amazon per year. They partner with some of the biggest companies in the industry.