Ad Creep Hits Amazon

Have y’all noticed what Amazon is now doing to pay the bills? I’m not sharp enough to have noticed the exact date when this began happening, but if you ever scroll down the item detail pages for certain items (I’ve noticed it lots in housewares, for example here), there are ads for other sites. I don’t recall this being the case until just the last few months. I’ve also noticed a marked increase in adsense and other display advertising on their pages. As an AdSense publisher myself, I have no basic problem with this. What I do believe, however, is that it is indicative of a very important problem.

As per FTC regs: if you click on links in this article, and buy something, I might make money. We now return you to your regularly scheduled informative post…

Amazon is starting to hurt from all of their lost affiliate traffic.

At least, that’s my best guess. I’m sure the thousands of affiliates who have been dropped by Amazon since states started passing affiliate nexus tax laws have taken their business elsewhere. While Amazon has not stated as much, my bet is they are hurting from it, and they have obviously seen a need to increase their other revenue streams. They can say it’s about improving your shopping experience all they want, but you and I, as affiliate marketers, know better. After all, would we have ads on our sites if they didn’t contribute to our bottom line?

I realize that Amazon also has other things going on that probably helped make this decision an easy one for them. For example, they’ve been undertaking some important infrastructure improvements that are costing them a bundle. In all, it’s been a sort of perfect storm for them, being hit by big bills for reinvestment at the same time as many of their hundreds of income streams have suddenly dried up. Lucky for them, they don’t have to fight for every scrap of traffic like we little guys do.

Granted, the affiliate link revenue didn’t dry up instantaneously, as it takes time to change links and whatnot. Add that to the fact that it can be difficult to find alternatives for every item (especially when you have multiple large sites). Still, I’d wager most smart affiliates are aware of their pending terminations by Amazon well in advance, and began early with their move to other options like Skimlinks, or simply finding companies who already have sales tax nexus in their states. I set up my Skimlinks account months ago, when the Tennessee legislature was pondering passing a similar asinine law. Thankfully it got shot down. Hopefully it will stay dead, but if it doesn’t, it’s comforting to know that Skimlinks can fix things for me almost overnight. perhaps I wouldn’t make quite as much off each sale, but that’s a helluva lot better than losing 100% of my Amazon revenue overnight.

Let me be clear, this is not Amazon’s fault

I’m not complaining about Amazon’s moves; neither their move to add ads, nor their decision to dump affiliates in affected states. I believe they (and Overstock) are fighting the good fight on behalf of all of us as they challenge the constitutionality of the affiliate nexus law in New York State (yes, I realize they already had nexus in that state, so it was no charity for them to keep their NY affiliates on. It’s definitely costing them in lawyers’ fees, though). No, quite the opposite, the stupidity of this whole thing rests squarely on the shoulders of greedy legislators who think they can overreach their authority and add millions to their tax coffers in the process. I’d like to think that they’ll learn they cannot.

After all, you and I already know that if you break the backs of your tax base, they can’t very well earn revenue for you, right? How about instead, you legislate in a more profitable direction – i.e. write tax laws (or repeal tax laws, as the case may be) so that you actually attract businesses to your state, rather than try to get a free ride on the backs of the affiliates who just happen to be unfortunate enough to live in your jurisdiction? After all, as California and half a dozen other states have proven by getting their affiliates dumped by hundreds of online merchants, that doesn’t work. The sad part is, the legislators likely won’t be able to see the handwriting on that wall for several years (or perhaps longer), given the sludge-slow movement of bureaucracies. The press, on the other hand, is already seeing the light.

I am somewhat of two minds on this; one part of me hopes that all of these asinine affiliate nexus tax laws get repealed. That’s the idealist talking. The realist says that Congress should just pass a law saying that all online retailers must collect sales tax for all states, and be done with it. I truly think that’s the direction we’ve been heading in, even if I don’t like it. And don’t mistake me; I don’t like that idea at all. like I said, it’s just the realist in me saying it’s the most likely outcome, so why just not get it over with.

Have I lost my marbles?

No. Believe me, I realize this puts a ginormous burden on the online retailers (I used to have an online store myself, and just having to collect sales tax for the state in which I lived was an amazingly difficult task, as you had to charge a different sales tax rate for every stinkin’ county), but I think that a proper lead time, of say, three or so years, would give the developers of online shopping carts (and of course larger companies who have their own custom dev teams) time to implement a reasonable solution for tracking and filing all of these claims. That said, in three years we could well be out of this stupid depression, and then we’d just be saddled with another new tax for the bureaucrats to use in financing their private jet tours and whatnot.

Still, the idealist in me wins, but that’s just because as a business owner (oh, what am I saying…as a human being), I hate all taxes. :)

Have you been affected by the “Amazon Tax” yet? If not, what will you do if you are?

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  1. Michelle says:

    Update: Lost Ball’s Splork just ferreted out an initiative by our very own governor to lead the way on a nationwide internet sales tax. He’s not happy that it’s a Republican doing this, but I think it’s a positive step IF it will stop the madness that is currently assailing the affiliate marketing industry. That is, if it can keep us from having to wonder which state’s residents are going to be the next to get booted from all the major affiliate programs.

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