May 2020

Rising Phoenix

Welcome back to Flexibility Is Freedom!

Once again, I hope you are staying healthy and staying safe.

The days don’t seem to get any easier this year for most people around the world. But what I have found is that every day is an opportunity to be grateful for what we do have and for the people with whom we share our precious time (most notably, our family).

This month’s income report will be short & sweet. The main theme for May 2020 was about resiliency and rebuilding after Amazon’s massive rate cut in mid-April 2020.

First, let’s go over the key metrics for this month.

Key Metrics

  • Revenue: $945 (-19% MoM, +852% YoY)
  • Sessions: 14,476 (+6% MoM)
  • Revenue per Thousand Sessions: $65.32 (-24% MoM)
  • Amazon Risk*: 61% (down from 75% last month)

*Percentage of revenue from Amazon Associates programs

In May, revenue declined ~20% from April levels, driven primarily by Amazon’s decision to slash commission rates by about 50% across most categories (see my April 2020 post for details).

Overall, the financial impact was less severe than I had anticipated. This partially reflects my recent efforts to diversify into alternative merchants and reduce my business’s overall dependence on Amazon Associates (currently about 60% of revenue, down from 75%).

Traffic remained stable and increased slightly by 6% over April levels. Moreover, I did not make any major content decisions or investments in May. Instead, I spent most of my time building a database of affiliate programs and major products/brands in my industry. This will help me more easily curate the best products outside of Amazon to recommend to my audience going forward.

Finally, revenue per thousand sessions, an overall metric of profitability, also declined in May by ~25% to around $65.00 per thousand sessions. However, RPS had been trending around $60+ in February and March anyways (which meant April was a really blowout month).

Overall, I’m also seeing conversion rates tracking upwards on a per-page level which gives me a high degree of confidence that recent conversion rate optimization (CRO) initiatives are resulting in solid improvements in bottom-line profitability.

Update on Earnings Per Click (EPC)

Last month, I also shared my prediction for Earnings Per Click (EPC) on the Amazon Associates platform for my business going forward (this obviously depends a lot of what type of traffic you’re sending to Amazon and what products you’re recommending).

Here are the actual results from May 2020 compared to my predictions:

  • EPC: $13.39 per hundred clicks (vs. $9.10 estimate)
  • Conversion Rate (CR): 18.2% (vs. 13.5% in April)
  • Average Order Size (AOS): $22.27 (vs. $24.52 in April)
  • Average Commission Rate (ACR): 3.3% (vs. 2.75% estimate)

Overall, conversion rates jumped to the highest level that I’ve seen so far since starting this business in 2018. Essentially, Amazon shipped the same number of items in May as April but with about 25% fewer clicks (because I actively redirected traffic to other merchants).

This may have been because:

  • People are ordering more items per order: Amazon shows you the number of items ordered but does not provide info on how many items per order. During the current pandemic, many people (myself included) are doing more bulk orders rather than single item orders to either stock up or in anticipation of shipping delays.
  • People are shopping more on Amazon: Also related to the pandemic, people are doing more of their day-to-day shopping on Amazon so it makes sense that conversion rates are increasing since users are planning to buy stuff there anyways.

Average order size declined slightly but it’s not a huge driver of EPC. Average commission rate, on the other hand, dramatically nosedived from roughly 6.0% in March to 5.1% in April to 3.3% in May (so about half of March levels, which is in-line with Amazon’s overall rate cut).

Up Next: Rising From The Ashes

The main theme of my next few months is to rebuild my business from the proverbial ashes of Amazon’s recent move. Fortunately, the experience and intuition that I’ve gained in the past 23 months has helped me better understand the Internet marketing business model and how to best position for future success.

In addition to adding more diversification to my business vis-à-vis alternative merchants (and carefully tracking the profitability of each merchant through EPC calculations), I also plan to add an additional layer of informational content that will monetize primarily via advertising and also pave the way for email marketing and broader branding initiatives.

I’m also thinking of possibly starting a YouTube channel on starting an online business, with a focus on SEO and affiliate marketing. I’ve been thinking about this for a while and I think there’s already been a huge spike in interest as this pandemic continues to drag on.

What I’d need to further research & understand is the relative competition for this type of digital asset (specifically on YouTube), the potential monetization routes & scale of this opportunity (or possibly pursue as simply a hobby to start with), and hammer out what my unique value proposition is (that is, why should people watch my videos?).

To Your Health & Happiness,

Tom

Rising Phoenix

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