Amazon is screwing over publishers, here's how Buzzfeed is punching back

On April 21, 2020, Amazon cut all affiliate revenue in half. That means a publisher making $1 million a year, will only make 500k this year. This is effecting large publishers too. Companies like Buzzfeed are already diversifying away from just Amazon. Here's how...

Buzzfeed drives a TON of sales

In 2019, Buzzfeed drove $425 million to affiliate partners. Now 21% of total revenue is from commerce. Thats up from 9% just a few years ago. Plus their native advertising revenue is down from 60% to 30% of total revenue.

So how are they diversifying revenue so well?

Buzzfeed builds software

First they started moving away from Amazon and other third party affiliate programs. They created internal software that lets them integrate any merchants products directly into Buzzfeed content.

They even built a tool that tells writers how much revenue they should expect, and what products to add to articles.

In 2017 they built out a Shopify App. The app lets merchants from Shopify apply to sell directly on Buzzfeeds content. Buzzfeed make 10-25% from Shopify merchants which is higher than the typical affiliate model.

With Amazon announcing it will cut affiliate fees, Buzzfeed is doubling down on forming direct partnerships with the brands. This means eventually they won't need amazon to sell certain products.

Buzzfeed is building D2C E-commerce brands

Buzzfeed is also directly selling to their customers. An example of this their Tasty brand. If you go to Tasty.co you will see tons of recipes on baking and cooking. Buzzfeed monetizes this content through their bakeware and kitchenware line. They sell these products directly to their customers, which has given them a hire margin monetization strategy.

The BIG problem facing publishers

Moving forward, Buzzfeed is looking to solve the attribution problem. The attribution problem is when Facebook and Google take credit for a sale when in reality the publisher drive the purchase intent.

For example if you find an article on vacationing in Hawaii, you will read that article and want to go to Hawaii. The next thing you'll do is search Google for tickets and hotels in Hawaii. And you will end up booking through your Google search..

When this happens Google takes credit for the sale, and thus captures the advertising dollars from the business who's products and services were purchased.

But in reality, Buzzfeed inspired you to go to Hawaii! The publisher drove most of the value in that customers buying journey.

To tackle this, Buzzfeed has said their plan is to close that gap. They are growing towards providing the products and services within Buzzfeed to create true integration - so they can finally solve the attribution problem.

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