Five years ago, Brian Lam created a website missing a key ingredient for running a media company: advertising. Now, the biggest names in online publishing are following his lead.
Lam's website, the Wirecutter, has become a Consumer Reports for the digital age, albeit with a unique model -- it posts in-depth reviews of gadgets, embeds links to buy them on e-commerce sites like Amazon.com, and takes a cut of the sales. The site has a staff of about 60 and posts only a few dozen articles a month, yet it's profitable. Last year, the Wirecutter drove $150 million in e-commerce transactions, Lam said.
"We move as much product as a place 10 times bigger than us in terms of audience," Lam said in an interview. "That's because people trust us. We earn that trust by having such deeply researched articles."
In recent months, several publishers including BuzzFeed Inc. and Hearst Corp. have started testing the Wirecutter's strategy, known as affiliate marketing, as the traditional model of driving clicks to boost advertising dollars comes under pressure.
Some publishers have seen their U.S. Internet traffic growth flatten as the Web matures and websites proliferate. Meanwhile, more readers are adopting "ad blockers" to avoid annoying marketing messages that slow loading speeds and drain phone batteries. And brands are increasingly buying online display advertising -- such as banner ads -- via automated exchanges, creating an abundance of supply that depresses prices that publishers can charge, said Brian Wieser, an analyst at Pivotal Research.
"Publishers know that advertising is a difficult business to be in if you're not named Facebook and Google," Wieser said. "You can grow your audience, but in a deflationary environment, you have to run just to stand still."
Lam sees less conflict of interest in profiting from the sale of products he recommends than in traditional Web advertising. The Wirecutter, which does carry some ads, has an incentive to help readers buy the best gadgets because it doesn't get paid if they return them, while many media outlets get paid by posting "click bait" that disappoints readers, he said.
"If someone buys something off our site that we recommend, and they hate it, we get nothing," Lam said. "So the more we help readers the better our business does."
Several big publishers are experimenting with embedding links in their articles to drive e-commerce sales. When readers buy a product, publishers earn a commission, which varies depending on the retailer. Amazon says publishers whose links lead readers to buy products get 4 percent to 15 percent of each sale, according to its website. Some publishers, including Vox Media and Gawker Media, use a service called Skimlinks, which connects publishers to more than 20,000 retailers willing to split the sales with them.
Hearst, the publisher of Cosmopolitan, Esquire and Good Housekeeping magazines, introduced a website in November called Bestproducts.com, which reviews products in 12 categories, including parenting, technology and health and fitness, and runs 10 to 20 articles a day. Hearst declined to disclose revenue figures for the website, but said its reviews of tech gadgets drive most of its e-commerce sales.
When Lam started the Wirecutter in 2011, his strategy wasn't completely new. Bloggers had supported themselves for years by reviewing products and taking a cut of sales. The Wirecutter was the first mainstream outlet to make that its primary model, said Lam, a former editor at Gawker's technology site Gizmodo and Conde Nast's Wired magazine.
Unlike many digital media startups, the Wirecutter has no outside investors. And its traffic is relatively small: it had 622,000 unique U.S. visitors in February, according to ComScore, a fraction of major tech websites such as the Verge. The Wirecutter isn't focused on traffic. It wants readers to buy products it recommends, so it takes its time, Lam said.
No gadget is too obscure for reviewing, Lam said, citing a "really random" piece his site did on the best windshield wipers.
"You wouldn't think it makes a difference," said Lam, who realized he didn't have streaks on his windshield in a year. "I didn't know that windshield wipers could annoy me so little."
SundayMonday Business on 04/04/2016