Things have been rosy at The New York Times lately, especially from a financial perspective, but it wasn’t always that way. Like most other newspapers, it was left reeling in the wake of the 2008 financial crisis, and in early 2009 it was forced to take a $250 million loan from Mexican billionaire Carlos Slim in order to stay afloat. The Boston Globe, which the Times paid $1.1 billion for in 1993, had become a money-losing albatross that it desperately wanted to sell, and it wasn’t uncommon for industry think pieces to ponder whether the Gray Lady would exist in another 20 years.
Of course, the company’s fortunes eventually changed. In 2013 it finally sold off The Boston Globe to local buyers. In 2014 it released a much-lauded innovation report that identified concrete steps the newspaper should adopt if it wanted to adapt to the changing media climate. But perhaps the most important change occurred in 2011 when it launched one of the most audacious experiments in the newspaper’s history: a metered paywall.
Though critics were skeptical that readers would pay for digital news, the paywall was a smashing success. In its most recent earnings report, the Times stunned industry watchers when it announced that it had surpassed $1 billion in subscription revenue, with subscriptions now making up 60 percent of overall revenue. On that same earnings report it revealed it had amassed over 2.6 million digital-only subscribers. The company has set an ambitious goal to reach $800 million in digital-only revenue by 2020.
But while most of the focus lately has been placed on the Times’s success with digital subscriptions, there’s another revenue stream that’s been growing in recent months. In its first quarter earnings report for 2017, it reported $26.4 million in “other” revenues, a 20.9 percent increase it attributed to “affiliate referral revenue associated with the product review and recommendation websites, The Wirecutter and The Sweethome, which the Company acquired in October 2016.” Its second, third, and fourth quarter earnings saw continued growth in this area, growing 12.8 percent, 17.8 percent, and 12 percent, respectively.
The New York Times bought The Wirecutter from founder Brian Lam for a reported $30 million. Prior to launching the site, Lam had been the editor of tech blog Gizmodo, helping grow the site’s audience to 130 million monthly visitors during his five-year tenure. But shortly after Gizmodo leaked photos and video of the not-yet-released iPhone 4 in 2010, an incident that famously led to Lam’s apartment being raided by police, he quit his job at Gawker Media, moved to Hawaii, and spent his days surfing.
As detailed in a 2012 New York Times column by the late David Carr, it wasn’t long before Lam reemerged onto the digital media scene, but this time with a mission that was antithetical to the fast-paced blogging ecosystem on which he’d built his career: rather than chasing every iteration of breaking gadget news, he would publish longform, methodical articles that would take individual product categories — say, music earphones or computer desktop screens — and recommend you the single best product within those categories, both in terms of quality and price. With its bootstrapped budget, the site hired product experts who were known to spend up to 50 hours testing dozens of gadgets in order to land on a single recommendation. And because The Wirecutter made its money from affiliate marketing, as opposed to CPM-based advertising, Lam could completely ignore the traffic metrics by which the rest of the digital media industry was defined.
Though Lam certainly hadn’t invented the concept of affiliate marketing, which is when a publisher gets paid every time a reader clicks on a product link and purchases it, The Wirecutter’s meticulousness and unique approach allowed it to rise above the competition and produce an almost immediate profit. By 2015, it was generating $150 million in ecommerce revenue (though its affiliate cut of that revenue was obviously much smaller), and that same year it formed an editorial partnership with The New York Times.
It only took about another year for the Times to buy The Wirecutter outright for about $30 million, and in doing so it joined a growing list of traditional media outlets that have embraced an e-commerce business model in an effort to diversify revenue. This embrace is the result of two confluent trends, the first being that almost all digital ad growth is flowing to the Facebook and Google duoply, leaving media outlets unable to achieve profitability through ads alone.
The second trend is the rise of e-commerce; as more and more consumers eschew brick and mortar retail stores in favor of online platforms like Amazon, they’re increasingly turning to online review sites to suss out which products are worth buying. The Wirecutter has ostensibly replaced the Best Buy store clerk who could walk you through the features of each television or laptop on sale.
The New York Times bought The Wirecutter a little over a year ago, and I was curious to learn how the site has evolved inside a much larger and well-funded media outlet. To find out, I contacted Mat Yurow, chief of staff and head of strategy at The Wirecutter. Yurow got his start in media as a social media editor at Bloomberg, later taking a similar job at HuffPost Live where he leveraged social platforms to drive viewership for the video news service.
Yurow moved from social media to product development after taking a job at the Times. “I was there to help the product managers, product directors, engineers, and designers to really start to think about how they could quantify their work and their contributions,” he told me. Every new product was assigned a value depending on how much revenue it drove, whether it was through new subscribers or advertising. He helped build frameworks that measured the financial impact of product changes, and these measurements “helped frame that conversation to the New York Times executives and say, ‘Here’s how long it took us to build this thing, but here’s also how much revenue we were able to drive as a result of this effort.’”
As it turns out, this kind of approach lends itself perfectly to affiliate marketing, where an increase in the click-through rate by just a few percentage points can result in a huge increase in revenue. So when Yurow’s boss, David Perpich, moved over to take on the role of president and general manager of The Wirecutter, he brought Yurow with him.
The 2018 Wirecutter, according to Yurow, is not radically different from the pre-acquisition version, the main difference being that it has access to significantly more resources and therefore has been able to scale more quickly (he said it’s doubled its staff count since the beginning of 2017 and increased product recommendations by 40 percent year over year). “It’s largely still staffed by a lot of the individuals who were there pre-acquisition,” he said, “which I think is such a powerful thing to have; even post-acquisition we have the roots of what really made Wirecutter special.”
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That’s not to say changes have been nonexistent. One of the largest strategy shifts came when The New York Times rolled everything at The Sweethome, a spin-off site that covered home goods, underneath The Wirecutter brand; it also dropped the “The” in the process and just renamed the site Wirecutter. With the rise of smarthomes and connected devices, Yurow explained, it was becoming increasingly difficult for editors and readers to discern whether a particular product belonged at one site over the other. “Our strategy has been to build a single, really strong brand that covers a breadth of products and categories as opposed to creating a really confusing fragmented environment where people have to figure out which site to go to for any given product,” he said.
Wirecutter, as I’ll henceforth call it, also began increasing the scope of what it reviewed. Pre-acquisition, it mostly focused on tangible products that you can have delivered to you via the mail. But now it’s not uncommon for the site to review different kinds of software and services, some of which don’t even require a purchase on behalf of the consumer. An article published in January, for instance, reviews different types of tax preparation software, landing on TurboTax as the best pick. Another article, this one published in October, reviews the best travel rewards credit cards; what’s unique about this one is that you don’t typically purchase credit cards, meaning that if Wirecutter is making a commission on the article’s links then it must be getting money based on each credit card signup, or some other metric.
That’s not to say that Wirecutter is necessarily making any money from that article. According to Jessica Spira, the site’s director of revenue, Wirecutter publishes its product recommendations regardless of whether it’s established affiliate relationships with the companies that produce the recommended items or services. “In some cases, we don’t have a relationship with anyone or otherwise they are products that just don’t have affiliate programs,” she told me. “It’s really about the reader first, and if our editorial team has decided this guide is a reader service and needs to be published, it gets published.”
Spira leads a small team of Wirecutter staffers who are responsible for forming relationships with the e-retailer sites that sell the products Wirecutter is recommending and vetting them based on a number of criteria. For any given product there might be dozens of potential outlets to link to, but Spira’s team will typically only choose a handful of them to include in the reviews. “We’re going to list the retailers that we believe in in terms of whether they have good return policies. They’re reputable. Their customer service is good. Their return policies are good,” she said. “We have confidence that the experience our reader will have at a merchant is a good one. If we don’t feel that way we won’t include that merchant. A merchant could say, ‘Oh, I’m going to pay you an enormous rate,’ and if it’s not a merchant that our business team feels is reputable, we will not surface them.’”
In many cases, retailers like Amazon and Jet.com have already-established affiliate programs. In others, the revenue team will reach out and negotiate a commission. An emerging trend in recent years involves straight-to-consumer products that are both manufactured and sold by the same company (think Casper mattresses or Blue Apron meals). In many of those cases, Wirecutter will link directly to the company in addition to any retail outlets that sell its products.
For most of Wirecutter’s existence, consumers have come to it, either via search or directly, when they want to purchase a product in a particular category and they just need help choosing the best option. Since the Times purchased it, there’s been increased focus on ways to build an audience that consumes the site’s content on a more regular basis. One way the publisher’s done this is by establishing collaborations between Wirecutter and The New York Times’s newsroom.
For instance, Wirecutter teamed up with Smarter Living, a section of the Times that focuses on service journalism. “There’s a series called ‘Five Cheapish Things’ that has actually really pushed our thinking on the types of formats to inspire new discovery,” said Yurow. “What ‘Five Cheapish Things’ really is is a discovery mechanism for Wirecutter review products. They’ll take five thematically related, often inexpensive products that we’ve recommended, they’ll remix them, and the Smarter Living team will add their own copy to talk about how these products can disproportionately improve your life. They’ll host our recommendations so that we’ve done most of the research, but they’ve applied a different editorial layer on top of it that feels more inspiration or discovery driven.”
Wirecutter has also built out a daily deals section in an attempt to grow a more loyal, returning audience. Unlike most deals sites and email lists, it only highlights deals for products that have been officially recommended by Wirecutter (the only exception: staff picks, which sometimes feature products that weren’t included in a category’s recommendations). The deals are highlighted on Wirecutter’s sidebar, rounded up in a daily email, and curated via a dedicated Twitter account.
The deals content has become especially important during major purchasing holidays. A recent Digiday article detailed the site’s “65-person Thanksgiving war room” where the team worked “in shifts to sift through a fire hose of deal offers coming from the retailers participating in America’s biggest digital shopping weekend, looking for discounts on the hundreds of items its staffers have already reviewed.” Yurow said they sifted through tens of thousands of deals in a period of a few days.
Later, Wirecutter published a special holiday gift guide. “Wirecutter provided two thirds of the recommendations for that gift guide,” said Yurow. It managed all the affiliate recommendations and also provided “feedback on how to make the gift guide a more conducive shopping experience … That gift guide was so popular among Times readers that we built it in a reusable, repeatable format so that we’ve already rolled out a similar collaboration for Valentine’s Day, and I believe we have a handful of other holidays that we have targeted gift guides for over the course of the year.”
The daily deals feature also provides an opportunity for Spira’s team to leverage its relationships with e-retailers. “We can say, ‘Look, if you decide to offer a coupon code and we have a relationship with you, we can surface that in our deals section,’” said Spira. “‘We can surface that to our social followers. We can put you in our deals email. We can look at some guide promotion. We can drive traffic to the guide in which you’re featured — drive more people than you would have organically.’” Of course, what will really make the daily deals section powerful is if retailers give Wirecutter exclusive discount codes it can promote, but Spira said her team has only conducted a few experiments on this front, and that it’s an area that she’d like to see grow.
Wirecutter’s increased content production rate, its collaborations with The New York Times’s Smarter Living section, the expansion of its deals product, and a website redesign that better optimized its affiliate links have led to 50 percent revenue growth year over year, according to Yurow. Spira’s team has also explored other revenue models outside affiliate sales. For instance, it’s experimenting with licensing out its logo to brands that want to brag about Wirecutter’s imprimatur in their advertising.
Several other product rankings companies have adopted this model. For instance, US News & World Report publishes rankings every year for everything from the best colleges to the best hospitals to the best hotels. If you see a billboard ad for a hospital that displays the US News logo and ranking, chances are that the hospital paid a hefty licensing fee to include it. After Wirecutter listed Ancestry as the best DNA testing kit, Ancestry launched an ad that featured the Wirecutter logo prominently. Spira confirmed that Ancestry licensed the logo and said that Wirecutter is still in the early stages of building out this line of business.
But while Wirecutter is continuing to experiment with new business models, there’s one thing you probably won’t see much of on the site: traditional display advertising. Though its team doesn’t guarantee that advertising will never appear on the site, for now it’s foregoing ads, partly because it doesn’t want to sow any confusion with consumers who are turning to it for unbiased product recommendations. “I’m certain that advertisers would be happy to reach our users — we have a highly qualified set of users,” said Yurow. “But we don’t want to do anything that would ever betray the trust of our readers, and if we were ever to do anything from an advertising perspective, it would have to be done in a way that was very clear that our advertising relationship had no impact on the recommendations that we made.”
As Wirecutter continues to expand its offerings, other major media companies are scrambling to enter the e-commerce space. Tronc recently bought a majority stake in a product review site called BestReviews, and stalwart publications from The Washington Post to New York Magazine have launched their own e-commerce verticals. Meanwhile, the affiliate marketing space has been hit with its fair share of scandals; recently, several online mattress companies have come under scrutiny for the shady relationships they’ve developed with review sites.
And then Amazon continues to be the 800 pound gorilla in the room. As it vacuums up more and more market share and consumers increasingly start their purchasing journeys on the platform, it’s changed its affiliate fee structure in ways that are less advantageous to product review sites. The Wirecutter team didn’t have much to say on this topic. “I can’t really speak to our relationship with Amazon except to say we have a good one,” said Spira.
One thing’s for certain: the e-commerce space is evolving rapidly, and whether there will be continued growth potential for The New York Times remains to be seen. But for now, revenue growth is steady and the Wirecutter brand is still as strong as ever. Ten years ago we were wondering if The New York Times would survive the media apocalypse; now it’s clear that not only has the Gray Lady survived — it’s embarked on a new era. It’s an island of optimism in an industry that’s experienced everything but.
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