Buried in Sunday’s charming New York Times profile of Brian Lam, the former Gizmodo editor and founder of gadgets recommendations site The Wirecutter, was a bright little nugget that should have jumped out at anyone involved in online publishing.
Lam’s revenue, wrote David Carr, is “low.”
How low? Oh, just $50,000 a month and doubling every quarter.
For a site that is run by a handful of people (“Brian Lam and friends” is all that has been published about the team, and I wasn’t able to find out from Lam himself before my deadline), that publishes only six to 12 posts a month, and is just over a year old, a track rate of $600,000 of annual revenue, and counting, is far from inconsequential.
Quoth John Gruber of Daring Fireball: “In what way is $50K/month – doubling every three months – ‘low’ for a site with a small staff? I’d say that’s great revenue, and eye-popping growth.”
What is perhaps even more eye-popping, however, is that the bulk of the revenue comes from Amazon and other affiliates, who pay The Wirecutter a small commission for referrals to their sites. There is only one banner ad on the site, and it’s served by a third-party platform.
On the face of it, affiliate links might seem a trifling part of a publisher’s revenue mix, but there is evidence that, as digital ad revenues flatline and publications cultivate more targeted audiences, they are becoming more important. If nothing else, they offer another revenue option that can help support a new wave of Web publications that are moving beyond a mentality that equates pageviews with money.
The first wave of Web publishing has been dominated by business models that demand high turnover of content in order to gin up traffic, which can then be used to attract advertisers. The likes of the Huffington Post, TechCrunch, and Gawker Media have done well with such a model. But there are signs of a shift in which affiliate links will play a significant role.
For example, in an internal email sent to staff in May, Gawker Media owner Nick Denton indicated that “content-driven commerce,” ranging from affiliate marketing to in-page transactions, is the company’s second most important growth area, behind its vaunted discussions platform. Denton said that the original business model for gadgets blog Gizmodo was affiliate fees from gadget purchases through Amazon, but it didn’t work because the company didn’t yet have the necessary scale. But that has changed. In December 2011, he said, Gawker Media made $70,000 from Amazon without really trying.
“No seriously,” he wrote, “it was an accident.”
Another online publication that has found some success with the affiliate marketing model is The Next Web, a media company that publishes a blog that focuses on international tech news. When Google released its new Gmail iOS app at the start of the month, The Next Web published a review and included an affiliate link that users could follow to download the app. Effectively, the link was an ad. The Next Web was one of the first to break the news, to the extent that the app for a short while seemed only to be available through its site. At least, that was the case when I tried to download the app from the App Store upon reading the news.
For The Next Web, revenue from affiliate links is not large enough to justify ditching ads, but it is certainly noticeable. “It takes a bit of time to get the links, add the disclaimers, and the rest, and it’s undoubtedly worth the amount of time that we spend,” business development director Brad McCarty said in an email. “It’s not going to pay anyone’s salary, but it’s a viable source of additional income.”
Every time The Next Web publishes an article containing an affiliate link, it includes a disclaimer at the bottom, noting, “While we only ever write about products we think deserve to be on the pages of our site, The Next Web may earn a small commission if you click through and buy the product in question.” It then directs readers to its Terms of Service for more details.
“We strive, first and foremost, to present our readers with applications that we consider to be of impeccable quality,” the statement reads. “No amount of commission on the sale of an application would move us away from this standard.”
McCarty said the decision to include affiliate links on the site came down to the question “Why not?”
“Affiliate linking, as we move forward, is having its phoenix from the ashes moment,” he said. “As we’ve seen with sites like The Wirecutter, it’s a viable source of income. But it has to be done right. No reader wants to feel like they’re being taken advantage of.”
He said affiliate links are a “round-robin win.” They benefit readers because The Next Web has done the legwork to showcase the best products, they help developers make more sales, and they help the site generate revenue. “It’s hard to see where a well-run affiliate program is anything less than a positive influence on all fronts.”
Affiliate links work best when they’re matched to a specific audience, particularly if that audience happens to be in a buying mood. That makes sense for The Next Web when it publishes reviews of apps. One assumes that because they’re reading an article, readers have at least some interest in the product in question. And it works especially well for The Wirecutter, which is highlighting the best gadgets for people who don’t want to wade through piles of blog posts to figure out which headphones to buy next.
Between 10 and 20 percent of visitors to The Wirecutter click on links, Carr noted in the New York Times, adding that it is “a rate that would make ad sellers drool.” Banner ads on other sites, by comparison, see an average click-through rate of just 0.25 percent.
The Wirecutter’s success with affiliate links has allowed publisher Lam to change not only his lifestyle, but also his approach to work. At Gizmodo, he grew tired of churning out blog posts in the name of pageviews. “There are two ways to have a publication,” he told Fast Company last year. “Highly curated and exhaustive. Exhaustive is wonderful, but that’s just not how I want to go.”
Lam now lives in Hawaii and spends his ample spare time surfing. It would be over-reach to attribute that lifestyle entirely to affiliate marketing – but there is, at least, a strong link.
[Image courtesy CJ Isherwood]