To be honest, I thought my last post would fall on deaf ears. I figured that nobody would be interested in digging through financial statements and other “boring” analysis of Google Adsense and Clickbank. But I was so pleasantly surprised with the great response that I have decided to do a Part II of sorts and do some in depth financial analysis of the Amazon Associates program. I want to thank those in the comments for requesting this – you ask for it – you got it!
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First of all, I want to be just as clear in this post as I was in the last post. I am simply looking at how much money is being made by affiliates in each of these programs. I am NOT suggesting that simply because more money is being spent on Google Adsense that this is the best monetization method for your website. That is a different subject. The way you make money on your website depends on the niche you are in and the keywords you are targeting. I think its safe to say that it possible to make good money with Adsense, Clickbank, Amazon Associates, and many other methods. I want to simply give you some insight into how much money is being made in these networks.
As discussed in my last post, Google Adsense is a beast of a program that spends approximately $8 Billion every year on its Adsense partners. I have been lucky enough to dip my toe in the Google money pool and the water feels just fine! The one additional point I will make here about Google Adsense is that its growing. More and more money each year is being spent. If you look at the same financial statement that I posted a couple of days ago, you will notice that in 2008 they spent $5.9 Billion. Now just 3 years later they are expected to spent about $8 Billion. So Google Adsense is a growing and robust ad network with a solid future in my opinion.
Amazon Associates is a great affiliate program for a number of reasons. First, you can make decent money by sending your traffic to a website that people already know and trust. Second, you make money no matter what they buy! If you send someone to Amazon through your affiliate link, you get a commission if the buy ANYTHING off of Amazon within 24 hours. Pretty sweet.
So, how much money is Amazon actually spending on their Associates program? Well, to be honest its difficult to pin an exact number on this, but with the numbers I dug up we can get a ballpark figure. Because Amazon is a publicly traded company (AMZN) they are required to disclose their financials. Here is a link to their most recent quarterly financials. They don’t have a line item for the Associates program specifically, they have it lumped in with their “Marketing” expenses. For Quarter 1 of this year Amazon spent $327 Million on marketing. Here is what Amazon says about this marketing number:
We direct customers to our websites primarily through a number of targeted online marketing channels, such as our Associates program, sponsored search, portal advertising, email marketing campaigns, and other initiatives. Our marketing expenses are largely variable, based on growth in sales and changes in rates. To the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our marketing expense.
The increase in marketing costs in absolute dollars in Q1 2011 compared to the comparable prior year period is primarily due to increased spending on online marketing channels, such as sponsored search programs and our Associates program, and on television advertising.
So, the $327 million also includes sponsored search, portal advertising, email marketing, TV advertising, and other marketing expenditures. So, we really don’t know if the Amazon Associates program is 10% of $327 million or 99% of that number. My guess is that its probably somewhere around 50%…just a guess. After all this is ALL the marketing expenditures of the entire company of Amazon – surely a good chunk of it is being spent outside the Associates program (as they explained). One last good thing to note about the quote from Amazon is that their Associates program actually grew from 2010 to 2011.
So overall, even if Amazon is spending $300 million a Quarter (an optimistic guess) on the Associates program, this is still only 15% the size of the Google Adsense program for Q1 of 2011 (Google spent $2 Billion on Adsense in Q1). So, overall, WAY more money is being made on Google Adsense than Amazon.
However, this doesn’t mean Adsense is better than Amazon for your website. You need to test. Just keep an open mind here. If you ever hear someone say that no money is being made in Adsense – just remember the numbers! Test your site out, give both Adsense and Amazon or even Clickbank products the prime spot (one at a time) on your sites for a period of time and see which brings in the most money for YOU!
In fact, I think this is a downfall of many sites (maybe some of my own included?) – they do not test out different methods. If you get it stuck in your head that you are going to only sell Amazon products on your site for example – you could be missing out on giving yourself a serious raise if you never even test out how Adsense performs on your site. This could go the other way as well.
I didn’t tackle the sales tax issue in certain states that is causing Amazon to drop affiliates from its Associates program in those states, because its really a different topic and I would have to do quite a bit of research myself.
So, overall – way more money is being spent in Google Adsense than the Amazon Associates program. What are your thoughts? Did I bore you for a second post in a row? Would you like me to dive into the financials of anything else?
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