Every few years a big screw-up comes along. There is so much buzz about Amazon affiliate and FBA that I’m sure this is the next one in row.

But first some introduction…

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Edit: It actually happened today as of 23/2/2017 and Amazon cut commissions for most by half or more.

Some people accuse me of posting this after the rumours, so let’s see….

Amazoncalypse

And this is just the first negative update, not the last one.

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Financial Market screw ups

Well know to everyone:

These repeat in cycles – pretty long cycles.

The most important signs of another screw-up coming is that even your grandma or a taxi driver talks about this BIG opportunity.

Just take a look at Snapchat – worthless company selling for $25 billion. In the documents submitted they even say “We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.”

Basically they say:

“Guys, give us $25 billion valuation so we can enjoy our fat salaries and fancy offices. We don’t expect to return profit, thanks! Yea, and by the way those shares won’t have any voting rights either. Thanks for creating a better world where people can easily put floppy donkey ears to their videos”

Actually there will be so many tech IPOs with crazy valuations in 2017 that dot-whatever crash is coming soon again as well.

But that’s the big guys… now let’s take a look on the smaller guys trying to make a buck with internet marketing.

Internet Marketing screw ups

Remember MFA (Made For Adsense) ?

The shitty 5-10 pages websites which only purpose was to get you click on the ads? Everyone and his dog were creating dozens – some hundreds or thousand of it – ie Spencer @ Niche Pursuits, or Justin & Joe @ Empire Flippers (for those who don’t know they used to be Adsense Flippers)

  • Spencer got his account banned without warning or explanation
  • Justin & Joe understood it is not a viable option to build mature business

Nobody is doing it now – because Google hated it and started giving out account bans, and/or search engine penalizations like Santa Claus.

Remember how everyone talked about shitty PBNs?

I was shaking like a junkie on heroin withdrawal when I saw everyone online ranking so fast! Sites that didn’t exist 4 months ago were having easily 40++ thousands of visits and the owners receiving fat checks.

I want too!!!

The voice in my head kept telling me. I was so close to buying few juicy links from Spencer’s PBN – luckily I didn’t.

Few months later a huge clampdown from Google arrived. Those internet marketers lost big time – Spencer again – it’s not like he is a bad marketer, quite the opposite – he was always few steps ahead.

Or NoHatDigital who were all over IM blogs bragging about theirs thousands PBN sites. Charging (if I remember correctly) $5000 for their training. Well, where are they now? Not a single blog post in one and half years.

That doesn’t mean PBNs are dead. Far from it, but the PBNs of today are as high quality as any website.

Amazonlandia

Now we are in Amazonlandia. Everyone throwing out shitty 20-500 pages websites (upgrade from MFA) which only purpose is to get you click on Amazon affiliate link and buy something – anything.

Amazon is in my eyes much bigger bitch than Google. Both are massive, faceless corporation with almost monopol standing (and ton of lobbyist in the goverments so they can keep it that way – lesson learned from Microsoft)

but

Google care about its employees
Amazon exploits its employees

If you get penalty / ban with Google you have a chance to fix what was wrong and get back
Amazon bans you for life and the chance of getting back is close to zero

As a bonus, Amazon may likely also sue you, not just ban.

Anyway Google & Amazon are big lovers. Just search for almost anything in Google and you can easily see Amazon taking 6+ spots from the first page.

Amazoncalypse

I expect the Amazoncalypse in two possible ways

  1. Google will push an update targeting sites whose sole purpose is Amazon Affiliate
  2. Amazon will cut cookies or/and commissions

Update targeting MFA 2.0 (Made For Amazon)

Little voices…

Amazon – oh, even penguins on Antartica know about us, and shop with the Amazon Prime… but still when searching for reviews they land on those marketer’s websites which cost us 7+ % of margin (billions).

Google – that’s right, our engineers struggle to keep them in bay. You are such a good friend, let’s create some kind of penalty so you can rather spend those extra billions on Adwords!

‘Amazon and Google shake their hands in agreement’

Amazon cutting cookies or/and commissions

This also happens over and over and over. A new company eager to become the market leader creates an amazing affiliate program. People promote them like crazy, the company is growing – everyone should be happy, right?

Here is how in my mind the management thinks

1st phase: Oh man, the advertising costs are killing us. Let’s create an affiliate program and recruit some good people!

2nd phase: Ohlala this is awesome! See the hockey stick growth? See the hockey stick growth? Let’s create performance bonuses for our affiliates. Let’s make all big money. Rainbows and ponies!

3rd phase: Mate, have you seen the recent financial statements? Those pesky affiliates costs us ton of money. We built our massive brand ourselves and they profit from it. But its evil we need to accept.

4th phase: I’m over it!! No way to pay those leeches that much money anymore! Let’s cut the cookies, let’s cut the commissions. We don’t need them! It will bring us many zillions $$$ extra a year.

What companies have done it before?
  • Ebay
  • Agoda
  • Booking.com
  • Ticketmaster

and many more…

Why do I say it’s a great business, but terrible investment?

Great business

You can start with literally few dollars and build a site making $5000 a month within a year. Up-keeping of such site is low. This is impressive!

You can sell such site for 30x multiple = $150,000

Terrible investment

If you buy the site above for $150,000 that the seller was able to create with very little money in a year you have just made super (stupid) risky investment.

Most Amazon affiliate sites are 20-200 pages with high quality PBNs and maybe little bit of outreach to get some good links.

How in the hell can you justify spending $150,000 on this? What if

  • New G’s update comes? The site has no history!
  • Amazon bans you?
  • Amazon cuts cookies?
  • Amazon cuts commissions?

Are you ready to lose the money?

More often than not there is no real substitution for Amazon affiliate program. At least if you buy a profitable Adsense site you know there is a profitable substitution – otherwise you wouldn’t earn well with Adsense.

What about FBA?

Even worse. You DO NOT OWN the store on Amazon. Amazon owns it. So good luck spending $2 million on FBA business that 98% rely on Amazon (yes, I’ve seen such).

Amazon can (again) ban you, or change the rules with blink of an eye.

They have all the data. Can see what products are highly profitable. As times goes they will cherry pick those products and only sell it themselves, if they can.

It is exactly the same what supermarkets did – created their own brand of the most profitable products.

My recommendation?

Build Amazon-powered sites / FBA and sell. If you have one, sell sooner rather than later.

If you want to invest money DO NOT buy Amazon FBA / affiliate sites.

There is plenty of websites with true investment potential. Just don’t be lazy, or don’t cry when you lose your cash.

Proven way to succeed is to leverage  what already is working

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