Affiliate Links and Antitrust
Let's talk about the Amazon Coat
This post is from Ranjan (the other half of The Margins).
When we think of the impact of giant tech platforms on journalism, Facebook and Google are the usual suspects. Amazon is certainly making its mark on the entertainment industry, but we normally don't think about how it's changing news production.
Now, imagine if Amazon had an army of journalists at its disposal, ready to be mobilized to help the Bezos army carry out their next sectoral conquest. And to take part without even really knowing what team they're on.
So let's talk about that Amazon Coat.
This year's must-have winter coat is the Orolay Women’s Thickened Down Jacket. It's an affordable item, managing to compete against the very expensive Moncler and Canada Goose coats of the world.
Here in NYC it's really a thing. You see them everywhere (my wife has one, so I will withhold any judgement). This Vox piece lays out a roadmap of this unlikely viral hit. It apparently started with:
a single originator: a teacher at the 92nd Street Y, where one of the women’s daughters went to preschool, who had seen it on a travel blog called the Blonde Abroad.
A single blogger can launch a trend that redefines the entire luxury fashion industry. The Canada Goose-crushing coat is made courtesy of an obscure Chinese manufacturer that makes chairs and storage units. It's like the perfect combination of Berners-Lee idealism and 1990s neoliberalism. This is what the internet was made for, right?
2: WARREN-HEDGING, VALUE-CHAIN CLIMBING
Let's talk about that name, the "Amazon Coat".
Amazon has been making a number of aggressive moves in fashion. It's quietly building private label brands, launched the Stich Fix-esque Prime Wardrobe, and started the anti-counterfeiting initiative Project Zero to convince luxury brands to sell on the platform. Suddenly, thanks to an unknown Chinese coat—that somehow has the name Amazon associated with it—they are "sending shivers" through the luxury sector.
While they're redefining luxury commerce, let's not forget the current regulatory pressures facing Amazon's private label brands. The idea that they mine 3rd-party seller data, launch competitor products for what's working, and then promote their own stuff is sounding alarms around the world.
In one fell swoop, they've managed to dodge the private-label regulatory criticism, even with a product that literally bears their name in print, but is somehow not a private label, while managing to scare the shit out of the luxury fashion sector. Oh, to be an Amazon Partnerships manager sitting across the table from a high-end brand convincing them to sell on your platform.
3: FREE MONEY
Finally, let’s discuss affiliate links in articles.
@Can said this next paragraph is pedagogical 😀, but for our non media-tech readers a quick summary of how this works:
Amazon has a very easy way to set up customized links where if a user on your site clicks the links and follows through on the purchase, you get a percentage of that purchase. The numbers can be found here, and as you can see below, you would get 10% of an Amazon Fashion item (or 7% of "apparel", I'm genuinely curious which category the 'Amazon Coat' would fall in).
In the low-margin world of ecommerce, these are some juicy percentages:
Gawker Media was one of the earliest examples where I saw this model in action (credit to @superfem and @shepmcallister). They told you about cool products, you trusted them, and if you clicked from their site and bought, they made money. According to the WSJ they made $10 million in revenue way back in 2014 (that's not even bullshit gross transaction volume, that's real revenue).
The Wirecutter took this a step further, with highly trusted reviews and monetization via affiliate links. "We tell you what's good, you trust us, and just make sure to click our link and we'll make some money so we can give you more recommendations". It's such a smart and reasonable business model.
But like most media monetization models, we can't have nice things. There are no clear rules about disclosure when it comes to affiliate links. The Wirecutter makes a decent effort, but for most sites the disclosure is hidden somewhere near the bottom, and for many, there is zero disclosure at all. The only way to know is to see a hidden affiliate tag when you click through. And this is assuming readers have any clue how this financial transaction works.
The Perfect Story
Now, back to that coat. It's just the perfect story: fancy in-the-know women have a fashion secret the journalist is letting you in on, and if you click through them they'll get 7-10% of the sale price. It would be weird if every random fashion site, news site and Instagram account didn't post about the coat. Future of news monetization, solved.
This is already happening in a way that hasn't been fully thought through. That Strategist piece we mentioned up top, we found fourteen affiliate links embedded in the article. There are no guidelines around disclosure and customers for the most part don't really understand what's happening.
The Perfect Circle
MBA professors should be clamoring to write this case study. Amazon has managed to channel their marketing spend in a way that both directly acquires customers while fulfilling brand marketing and PR objectives. Amazon can directly threaten luxury brands now that they're players in the trendy fashion game. They can manage to associate their name with a fashion item, yet avoid all related regulatory scrutiny.
Meanwhile, media companies all fall into formation thanks to this magical affiliate revenue stream, and keep churning out questionably-disclosed articles. Even worse, media companies get a taste of what seems like free money, which is never, ever a good thing.
The only thing that is for certain, get ready to see a lot more stuff like.....The Amazon Swimsuit…..
END NOTE 1:
I've been using a Chrome extension called FakeSpot that analyzes Amazon reviews for suspicious behavior, and provides a grade for the validity of reviews. The Amazon Coat receives a "D" and adjusts the 4.2 out of 5 stars down to a 1 star-rating.
END NOTE 2:
To have been a fly on the wall for this call (and any journalist readers, there has to be more to this) - also from the Strategist piece that started this all:
Despite the fact that it was a relatively small local trend story for a New York-focused media brand, the post surged. A few weeks after it was published, Amazon noticed, too, and reached out to the Strategist asking what was going on. By now, the Strategist post is responsible for driving nearly 10,000 sales, and the coat has “Best Seller” slapped on its product description.