Like many tech publications, Wirecutter reviews tools, tests products and recommends purchases. But unlike other tech journals that rely on ads or subscriptions, Wirecutter makes money through hyperlinks.
When readers click on a link on the site and make a purchase from an online merchant such as Amazon.com, Wirecutter keeps a portion of the proceeds.
This business model – called affiliate marketing – is a growing area of interest for media companies that are struggling to make up for declining advertising revenue. It’s one that The New York Times incubated on Monday with the purchase of Wirecutter and its brother site, Sweethome, which recommends household goods, for $30 million.
Many other media companies are experimenting with affiliate marketing as well. Both Time Inc. and Conde Nast and Vox Media affiliate links through Skimlinks, a service that connects online publishers with retailers. Hearst, which owns magazines like Esquire, Cosmo and Elle, last year launched a site called BestProducts.com centered around affiliate links for recommended products. The Washington Post, owned by Amazon founder Jeff Bezos, includes affiliate links in some articles.
The media initiatives come at a time when retailers are seeing their share of sales from affiliate links rise. Spending on affiliate marketing in the United States — or the revenue segment paid to sites with links that drive customers to retail sites — jumped nearly 17% in five years to $4.5 billion in 2016, according to a study by Forrester Research.
Media companies are likely to rely more and more on affiliate links, creating a symbiotic relationship with retailers who also benefit from increased traffic to their websites, said Sucharita Mulpuru, chief retail strategist at Shoptalk. Retailers can generate anywhere from 5% to 10% of total sales from affiliate links.
“It’s the merging of content and commerce,” Mulborough said. She said respected publications and websites have real potential as sales drivers because they have readers they trust.
Mulborough, for example, has developed a reputation as a “taste maker” that “has a real impact on what people buy,” Mulborough said. The site’s founder, Brian Lamm, told Bloomberg that the site generated $150 million in e-commerce sales last year.
Mark Thompson, CEO of The New York Times, acknowledged the allure of the Wirecutter model when he announced the deal on Monday.
He said in a press release that both Wirecutter and Sweethome have a “very attractive revenue model.” “It’s an admirably run business.”
Executive Editor Dean Paquet said in a staff memo obtained by Politico that The New York Times is already using affiliate links in its bestseller lists and reviews of restaurants, movies and theater.
“This investment represents a strong step towards adopting more of this approach,” Paquet wrote.
For Wirecutter, Amazon provides a large portion of the revenue, although it also ties in with retailers like Best Buy, Apple, and Home Depot. Amazon said on its website that it pays 4% to 15% of sales for affiliates depending on the number of items sold.
Amazon’s huge influence in e-commerce means that sites that rely on affiliate marketing, in turn, depend on Amazon. Changes or modifications to the affiliate program may have implications for publishers.
Amazon has already brought back its affiliate program. In several states, including Louisiana and Arkansas, it has cut its program completely due to problems with the state sales tax.
But analysts said publishers have plenty of options to connect with other retailers and work with affiliate services that connect websites to thousands of e-commerce players.
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