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Amazon May Have Just Killed Free Kindle eBook Promotions

8407445294_4f422efed9[1]When Amazon announced new restrictions yesterday on how their affiliate partners could promote ebooks, they said the new rules would only affect a fraction of a percent of affiliates. Sadly, that is not true. The new rules are actually going to affect all Amazon affiliates, and  complying with the new rules is going to require the affiliates to do the impossible. Amazon wants affiliates to control what customers do after they click a link and go to Amazon.

According to the new 80-20 rule (my name for it), Amazon affiliates will be penalized in any month that one, their affiliate ID shows up on more than 20 thousand free Kindle ebook purchases, and two, the total number of paid Kindle ebooks account for less than one in five purchases. If an Amazon affiliate can't comply with the rule, they will lose their income for the month.

When that rule was revealed yesterday there was a lot of hand-wringing among the free ebook sites as well as among authors and everyone interested in promoting ebooks by giving them away for free.  There was a lot of discussion how this would kill most of the value in KDP Select (the optional free days is valued by indie authors as much as the KOLL payments). There was talk about how this would damage the ability of free ebook sites to promote ebooks while still covering the costs of running a website.

Update: Andrys Basten has pointed out that Amazon's new rule might have 3 clauses, not 2. The first requirement for the 80-20 rule could be that the rule only affects sites that, in the opinion of Amazon, "are promoting primarily free Kindle eBooks". The rest of my post is now hinges on a drone at Amazon deciding on whether an affiliate fits under the first clause.  That does not exactly fill me with confidence. (Note: Other reports suggest that Amazon has said there are only 2 clauses.)

This is all true but we were thinking too small. You see, Amazon's new rule counts all free ebook downloads, not just the ones linked to directly.

For example, let's say you click on this link to Amazon and then get 5 free ebooks. Even though I didn't promote one of those free ebooks, I am going to get dinged for all 5 downloads. They will count towards that 80-20 rule.

The problem here is two-fold. Not only could Amazon potentially penalize any affiliate, this rule also assumes that affiliates can control what Amazon customers do after they click the link.

The larger Amazon affiliates are but a single download frenzy away from going over the 20,000 limit. What's more, this Sword of Damocles dangles over even the small and medium free ebook sites. Earlier today I heard from George Burke, the owner of eBookDaily, a 2-month-old free ebook site. According to George his site has now has 12 thousand active members. Under the new rule George is going to lose his Amazon affiliate fees in any month that the members average more than 2 downloads each.

I am only slightly kidding when I say that Amazon expects affiliates to practice mind control over everyone who clicks a link. Crazy, no? I'm still not sure how they expect that to work.

But the free ebook sites can always switch to promoting paid ebooks, right? That will get the average up and minimize the chance that they'll violate the 80-20 rule, right?

I'm not so sure.

The problem with trying to encourage the average ebook buyer to pay for more ebooks is that the ratio of purchased ebooks to free ebooks is rather low. I have been told, and a second source confirms, that the average ebook buyer probably downloads 15 free ebooks for every one they buy.

Edit: My original source says that the ratio of free to paid acquisitions is even higher than 15:1 (that was old data).

Second Edit: Smashwords reported in April 2012 that they saw 100 free downloads for every paid ebook. Look at the slides here (slide #49).

That's a 15:1 ratio, and in order to comply with the 80-20 rule the free ebook sites (and all other Amazon affiliates) will have to try to get Kindle customers to buy 4 ebooks for every free title purchase at least 1 paid title for every free one either by getting them to download fewer free ebooks or by getting the customers to buy 4 times as many ebooks as they buy now.

One possible solution is that they could switch to listing more paid ebooks. Many sites already list a lot of paid deals, so I'm not sure that will have much of an effect in changing people's behavior. Affiliates could also stop listing free ebooks entirely, but there is no guarantee that it would have any effect on the downloaders.

In any case, the real problem here is that Amazon expects affiliates to control what happens after someone clicks a link.  I know it sounds crazy but that's what Amazon wants.

If anyone can think of a solution, please share. Also, please feel free to point out the flaws in my reasoning.

If you ask me, I think Amazon should simply disallow affiliate links on ebooks.  It would be easier on the affiliates, but it might also be more damaging on Amazon's bottom line.

Barnes & Noble made a similar move last March when they stopped paying affiliate commissions on Nook ebooks. I'm sure you can recall how badly they've been doing this past year in terms of Nook hardware and content sales.

Amazon probably won't suffer quite so much of a slowdown in growth, but they are still creating an opportunity for one of their competitors to step in and start trying to take customers away.  Given that more people read on smartphones and tablets than on ereaders, this is a real possibility.

image by dqqd

58 Comments on Amazon May Have Just Killed Free Kindle eBook Promotions

  1. Amazon is asking affiliate sites to do the impossible — they cannot control how many books people download after they get to Amazon. This is ridiculous.

    The other option is for all these free ebook sites to dump their Amazon affiliate program and go to Smashwords, who pays 11% commission and has no such restrictions.

    Authors would be well advised to go to Smashwords, too, since authors are relying on free ebook promotions to promote themselves.

    The free ebook promotions have been a critical factor in making Amazon the largest ebook retailer — if all that outside traffic (and the sales that go with it) goes to another site, it will put whoever works with affiliates in control of the ebook market (eventually).

  2. To follow up, Amazon can’t afford to disallow affiliate links at all — it drives a lot of traffic to their site. If all of a sudden everyone is pushing readers to other sites instead of Amazon, it will result in a huge decrease in sales at Amazon — there is much discussion of “ebook discovery” these days — and reviews, comments and affiliate links are a huge part of discovery in the absence of a physical store to browse.

    Why would any blog or site bother to link to Amazon and get nothing when they can link to the same book at Smashwords (11% commission) or Kobo (5% commission)?

    This is a huge opportunity for the other ebook vendors to pounce.

  3. Is this a bad thing? How many blogs and authors wrung their hands that giving books away might “devalue their art”?

    Amazon’s playing a longer game than anyone can currently see. KDP Select and the widespread use of free promotions did a great job maintaining Amazon’s dominance of the ebook market. So far, five years after Kindle’s introduction, there’s really no competition, only other options. Mainly because this is the sort of long game Amazon continues to play.

    Free promotions have been effective, but this seems like a further step and positive development in indie-dom. Most of the indie authors who’ve so far made their names have done so via low- or no-priced ebooks (Locke, Hocking, Howey, et al.). Maybe it’ll be good to see free more as a strategy than a solution.

    I wonder, too, if it’s a sign that Kindle (and its associate platform) is doing better than either Amazon or Bezos predicted (shrewd as they may be). I’ve seen various analysts and tech blogs mention the “loss leader” idea, and maybe it’s right now leading with more loss than they’d expected but solely because it’s just doing so damned well.

  4. I can tell you at the end of March how it pans out for my blog. We stopped freebie posting today.

  5. Clearly, Nate, you are overreacting. If this wasn’t a 100% positive move for all parties involved, we know that Amazon wouldn’t do it. After all, Amazon is our friend, and friends don’t screw friends. [said with sarcasm]

    Seriously, this is really a great move for people like me. It will encourage free ebook sites to link to Smashwords, which will encourage authors to sell their ebooks via Smashwords, which means that there will be fewer Amazon exclusives. And, yes, I know that I can install a Kindle app on my desktop and download Kindle ebooks and then strip the DRM (maybe) and convert the book so I can read it on my Sony or Nook. But why would I as the consumer want to do all this extra work when there are thousands of ebooks already available to me at B&N, Sony, Kobo, and Smashwords. Missing out on some Amazon exclusives does me no harm; it does the authors more harm because it means no possible sale to me.

    I suspect — I do not know — that the crackdown has come because Amazon is not selling enough ebooks as opposed to giving away free ebooks. At some point in its life, Amazon has to start bringing in dollars for investors, and you don’t do that with freebies.

    As regards the ratio of free ebooks to paid-for ebooks, I suspect that the ratio is probably closer to 25:1 or 30:1. I know that I rely on free ebooks to determine whether I like an author or a series, and if I do like the freebie, I then buy the other ebooks by the author. But what that means is that I download many more freebies than I buy, because like many other readers, I find that too many of indie ebooks are not worth the time to read.

    Anyway, I hope this move by Amazon ends up boosting Smashwords and making more indie authors choose Smashwords rather than Amazon KDP.

  6. Amazon has a stranglehold on the ebook market. You’d have to be a fool not to realize that since they’ve eliminated the competition soon they will start raising prices, limiting choice. These are the people who remove buy buttons if you don’t bend to their will. Why Richard thinks amazon would do it if it were only positive for all parties is unsupported by their past actions.

  7. Ronald Mortris // 24 February, 2013 at 8:05 am //

    I started buying ebooks over 10 years ago from Baen. I only added Kindle/Amazon about 4 years ago. Just a few weeks ago the two finally signed an agreement that included removing almost all free or discounted content at Baen. And it was retroactive. Baen had a practice of placing old ebooks at the start of series in their free download are in order to encourage new readers to start these old series. 16XX franchise and Honor Harrington are examples. When Baen closed their library ALL of these books were removed, even those that I had paid for. I no longer have access to books that I paid for. And after 3 computer replacements and the fact that there is no easy way to download their ebooks I had gotten lazy and just signed onto their website to read online. I no longer had backups on my hard drives. My content to ebooks I paid for no only longer exists but I cannot even rebuy the books as ebooks. I don’t think I bought anything from Baen or Amazon since.

  8. Timothy Murphy // 24 February, 2013 at 8:55 am //

    Ronald – stop spreading lies. First, the Baen Free Library is still there – it is reduced in size due to licensing issues resulting from Baen deciding to sell through third party vendors (including Amazon) but it is still there. Second – downloading from Baen is easy – if you cannot manage that I can only conclude yuou are essentially computer illiterate. Baen had always reccommended downloading and backing up purchased e-books (making it possible for you to do that is one of the main reasons they insist on only providing DRM free files) – if you failed to do that don’t blame Baen for your losses.

  9. Ronald: Your statement is close to 100% untrue, an impressive achievement. The Baen Free Library was temporarily reduced, yes, because the *identical* content can’t be available for free, or Amazon’s *automated* systems will note “hey, that’s up for free” and then reduce the price of their copies to suit. However, the BFL content is going back up as authors provide more stuff (usually just a new foreword or afterword) that makes the one on Amazon a “special edition” so that it will not be subject to that restriction.

    You may not be able to re-download your stuff that you had before, but jeez, if you don’t backup, that’s what you risk. My “Digital Knight” is no longer on the BFL either, but not due to Amazon; due to the fact that the rights reverted to me and not Baen.

    On the other hand, we’ll be putting _Boundary_, the first in the series, up soon.

  10. Nate,
    I referenced your article (thanks) and wrote a blog entry and I do have a somewhat different take from yours on this. Won’t leave a direct link since your spam filter is far too moody and aggressive on those :-)

  11. Ebooks for a penny then?

  12. You’re right, there is a third clause. It does limit the fallout to the free ebook sites.

    Damn. I hate missing an important detail.

  13. A 15:1 or 25:1 free to paid ratio?

    Well, once again I’m on the fringe.

    I’m like 3,500:0 so far.

    But I have hundreds in my Wish List TO BUY when I finally get a damn tablet.

  14. Eagerly awaitng the full release of the third to see if there’s an aswer to “Why saturn?” :)

  15. Well, I’ve had very few glitches with the FireHD8.9… 😉

  16. The cry to stop the flood of free eBooks is really “We must stop the free eBooks because no one is buying MY eBooks.”

    Even if there was NO free, no one would likely buy your damn eBook anyway.

    There were hardly ever any free PAPER books. Yet MOST paper books failed and had sales that were crap and couldn’t offer a writer a living.

    Wake up.

  17. Amazon is just doing what google already does, It is giving itself the power to determine the validity of any click and decide to not pay for ANY valid clicks if they by their own unknown and incontestable reasons decide to not pay.

    At least they don’t do a google and decide you kick you out of the program completely without any recourse.

  18. It appears, confirmed by Amazon, that there are only 2 clauses. They are used to decide if the site was promoting free ebooks.

    You may have originally been correct.

  19. Thanks!

    Her interpretation makes more sense, but it also assumes that Amazon wrote the new rule in a less than clear manner.

  20. I know that.
    Just a reminder that sooner or later you’ll have to let go of the dream tablet and buy something actually shipping. 😀

  21. Fbone, I saw Karen’s post at MobileRead about an email from someone — but the person is not named nor is there a title. Someone else received an email reply like that today but said they’d want to check with another party when the shop reopens.

    Also, their legal team would have to rewrite that paragraph to say what some at Amazon may really want it to say. Because it doesn’t say that. In legalese, that kind of thing is pretty important. One could even pick on “primarily free” to describe books that are primarily free but there’s no such thing – they’re free or they’re not, at any given time.

  22. I agree it’s not very clear which is why there are emails floating around.

    However, “promoting primarily free Kindle eBooks” can be defined any way Amazon chooses.

  23. It seems the latest specs on the 7-8″ tablets are a downgrade to what is expected.

  24. Amazon is cracking down on the wrong side of the problem. Free e-books, and download sites are free advertizing. If Amazon wants to sell more, they ought to restrict multi-book writers to only go free with a third or less of their titles. Rotating through one’s complete stockpile, giving them all away, may not be the best way to maximize sales.

  25. If I ever complete my stories and get them good enough to publish, I will publish on Smashwords first and only on Kindle if I think it’s worth it. As I have a basic plan to release some free short stories and a free book 1, I wouldn’t want any affiliates to lose money by directing people to my free stuff on kindle. Without releasing any free material, I doubt I would generate any sales at all. I have downloaded quite a few free books, but as a result I have bought the remaining books of about 8 series, and a few other series I have bought one or two sequels to.

  26. PS without those free books I would have only stuck with authors I already knew such as Michael A. Stackpole.

  27. Totally agree with Bill Smith (first comment). If Amazon don’t want you just go to Smashwords. Leave them alone and get a better deal elsewhere.

  28. I replied to a forum posting on this at Amazon and am putting it here also to see if I can make clearer my own understanding of this and the reasons for it.

    The post:
    What’s interesting is that an affiliate could cause downloads of 40,000 free books in a month but if these are ‘only’ 60% of all Kindle books ordered, then it’s okay. [It’s a matter of balance and probably expenses covered.]

    Of a bit more interest to me is whether they will change the wording in the explanation of their changes linked to by Nate Friday, in which they say [the capitalization surrounded by “=” signs below is mine]

    ‘1. What is changing for Associates who refer free Kindle eBook sales?
    Starting March 1, 2013, Associates who we determine are promoting primarily free Kindle eBooks =AND= meet both conditions below for a given month will not be eligible for any advertising fees for that month within the Amazon Associates Program.’

    Clearly attorneys know that the word ‘AND’ above should be changed to “WHEN” if the first statement is not to be taken as part of the set of circumstances defining what could cause income to be eliminated for a month.

    Right now the 2 numbered conditions further define their “determine”-ing Associates who are “promoting primarily free Kindle eBooks … =AND= who meet both the conditions below that.

    If they change that word to “WHEN” — then it makes a large difference.
    If they are to take away income otherwise earned, they have to be clearer.

    And they have to state it identifying themselves with name, title, serial number and rank :-) Kidding aside, at least a name and title.

  29. How about encouraging authors to charge a penny per book? Problem solved?

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