The COVID-19 pandemic has forced consumers to have a more direct relationship with media and e-commerce, concentrating on the undeniable revenue generating potential of affiliate programmes for news publishers.
While advertising revenues crashed in 2020, e-commerce revenues, through affiliate programmes, grew rapidly, with some publishers experiencing an annual growth of up to 675%.
Wirecutter, a product review and recommendation site founded 10 years ago, was acquired by The New York Times in 2016. It was a validation for the brand’s business model as several media companies were only beginning to experiment with affiliate marketing.
“The acquisition of Wirecutter by NYT makes sense because we share the same journalistic DNA and take an unbiased, rigorous and meticulous approach in our reportage,” said Leilani Han, Director, Business and Development Partnerships, during WAN-IFRA’s recent LATAM Media Leaders eSummit.
Staffing and roles
Wirecutter employs about 160 people, of which half are responsible for editorial functions. The other largest group, which makes about 25 percent, takes care of digital and product. Han’s team of seven is responsible for all the partnerships that drive revenue for Wirecutter, while two people are responsible for company planning and strategy.
The brand doesn’t have a traditional sales department and doesn’t do advertising sales either. Even though affiliate marketing is its primary revenue source, the brand is also responsible for some amount of licencing, programmatic advertising and has a few strategic partners that fall outside of the affiliate ambit.
Wirecutter was acquired as a standalone business, but collaborates with NYT in technological, infrastructural, and editorial and audience developmental areas.
“We bring our product recommendations and advice from Wirecutter to NYT,” says Han. “Our service journalism content is what tends to get picked up for an NYT feature. I also work with my colleagues in advertising, but it’s more so in instances where NYT clients are interested in getting visibility with Wirecutter.”
Venturing into affiliate marketing
It is imperative for small-scale publishers venturing into the affiliate space to take a step back and assess their goals, which are two-fold: The first is revenue and the second is a sense of purpose in serving the audience the content they want.
Han advises that a good idea is to assess the skill sets and interests of the journalists on staff. Another option is to onboard experts who have a deep understanding of the products and a tactical know-how of how they are used.
There is a difference between writing about a product and writing about how people search for and use that product. Understanding that gap and writing rich content is important for conversions and ultimately, revenue.
Han says it is possible to make affiliate marketing one of the primary sources of revenue if a publisher ventures into it, understanding that getting the business to scale takes time and patience.
Understanding audience behaviour is elemental, too. Branching into the affiliate space requires a deep level of understanding from your loyal audience, who are used to a certain kind of content production cycle and consumption behaviour, along with doing due diligence about their interests and queries.
The labour behind scaling and traction starts once a publisher builds a connection with its audience.
“Affiliate marketing is not a spigot that can be turned on to an automatic flow of revenue, and making it the primary revenue source requires time and dedication. Even for an established business like Wirecutter, being able to grow incrementally comes down to making smart decisions that are based on analysing data points and serving the reader,” says Han.
But is your audience ready to adapt to online shopping? E-commerce is a major factor that impacts a publisher’s chances of branching into affiliate networks. The US market is a mature space with an evolved affiliate marketing system, in not just retail but in finance and business services, too. However, analysing and establishing the online transaction pattern of local users is a big consideration for regional publishers.
Attribution is a hotly debated topic in the affiliate space. The most common attribution model is the Last-Click Attribution, which is a rules-based and often single-affiliate attribution model. It typically gives 100 percent of the credit for a conversion to the last click in a conversion path.
Today, the more sophisticated company advertisers are leveraging a multi-touch attribution tool. So, they’re not doing Last-Click Attribution merely within the channel but across their various marketing channels.
“This is a space in affiliate where you have to commit long-term and indulge in rigorous testing to understand your audience and know what will get them to convert off of your affiliate link,” says Han.
Having a close relationship with your partners, both on the merchant side and within the networks, is important because you are relying on them for data. Being able to have a clear feedback loop in the metrics and understanding how that compares to other partners is an important data point to understand your brand’s performance. Network partners have visibility into a much broader scope of what’s going on within the network.
Business model – CPA vs CPC
Wirecutter runs primarily on the cost-per-acquisition model (CPA), and on the cost-per-click (CPC) model for a few partners. In terms of tracking available with affiliate networks, a publisher is not going to have the same visibility into the data with CPC as they would with CPA.
“We have CPA and we get a percentage of the sale. We’re also receiving information about the transaction itself, nothing personally identifiable, but a valuable data point as it gives us insight into whetheror not we have been successful in our recommendations to people buying not just our Wirecutter picks but also the halo purchases,” says Han. “It’s a valuable data source to seek inspiration for other coverage and product verticals a company ought to be thinking about.”
CPC is a good model to start off with depending on where a publisher stands in terms of scale and monetisation. A CPC model is more of a guaranteed form of payment compared to CPA, which doesn’t pay until an action (typically a transaction) takes place.
In Han’s experience, CPC tends to lack product level information, so that is a trade-off that a publisher must consider.
“Typically, on a CPC, you’re going with budgetary caps – the partner is not going to necessarily want to blow their own budget because you might have a campaign running that drives it to scale and hence, caps are more frequent,” says Han. “Merchants still have budgets that they have to manage even with a CPA, but there tends to be more flexibility.”
How to achieve scale and monetisation?
Wirecutter has grown over the years through trying to get SEO right, in addition to tracking metrics such as page views and unique users, while the investments in marketing have been minimal. This is, in fact, the first year the brand has hired a marketing lead.
Wirecutter uses the Earnings Per Click (EPC) efficiency metric for monetisation employed across businesses, products, categories and partners. EPC helps in equal and fair evaluation of partners across the board.
“The formula is simple for us – how much money did we make per click? We have a certain EPC that we know we drive by category and partner. When we’re evaluating a new partner, we need to ensure they are going to be a value addition in driving incremental value and not be an opportunity cost,” says Han.
COVID’s impact on Wirecutter’s growth
Apart from covering consumer electronics, Wirecutter has a huge user base in home category products, which have seen explosive growth during the pandemic. For example, with people confined to their homes and willing to spend money on comfort, the sleep category boomed in the US.
“Everyone was terrified and needed information. Because we were already writing about products, we quickly pivoted to trying to report on the topics that people needed answers to. Ecommerce was a volatile space for the first couple of months of the pandemic, with several companies shutting down their brick and mortar stores,” says Han.
The logistics and supply side of businesses could not handle the exponential demand the pandemic caused, throwing the cycle askew. Now that businesses in some parts of the world are beginning to get back to normal, reports show that consumer habits of shopping online are here to stay.